Amid reports that the Election Commission may impede the Reserve Bank’s plan to issue new bank licences before general elections, the apex bank will go ahead with issuing new bank licences only after the conclusion of general elections in May. The RBI had written to the EC seeking their views on issuing new bank licences. It is reported that RBI’s move would amount to a violation of the model code of conduct as election dates have already been announced. RBI governor Raghuram Rajan has asserted that as soon as the central bank gets the permission from EC, the bank licences would be announced within a short period thereafter.
On the other hand, EC has put its approval on hold and would like to hear from the central bank why was it crucial to grant the licences during the poll period. Further, the EC may give also ask RBI to hold decision for another two months till elections are over.
At present, there are 24 public and private sector applicants for new banking licence including NBFCs and various large corporates such as India Post, IFCI and large business houses such as the Anil Ambani group and the Aditya Birla group. The RBI had issued final guidelines that would govern the new set of proposed banks. As per the guidelines, banks should have a minimum equity capital of around Rs 5 billion and not have foreign ownership of more than 49% for the first five years of operation. The rules also require that one out of every four branches opened by the new banks should be located in rural areas. Earlier, the central bank has received 26 applications for new banking licences, however, Tatas and the Mahindras withdrew their applications saying with the given stringent criteria it would be better for them to continue with their NBFC services.
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