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New bank licences to be issued in January: RBI Governor

September 04, 2013 19:25 IST

The Reserve Bank on Wednesday said it plans to issue new bank licences around January, "consistent with the highest standards of transparency and diligence."

Raghuram Rajan, who today took charge as the 23rd governor of the central bank, said an external committee headed by former RBI Governor Bimal Jalan would be constituted to screen the 26 applications for bank licences.

"I hope to announce the licences within, or soon after, the term of Deputy Governor Anand Sinha who has been shepherding the process. His term expires January 2014," the RBI Governor said at his maiden press briefing soon after taking charge.

Noting the fair amount of public attention to new bank licences, Rajan said "the RBI will give out new bank licence as soon as consistent with the highest standards of  transparency and diligence."

Referring to the screening of bank licence applications, Rajan said, "We are in the process of constituting an external committee. Dr Bimal Jalan, an illustrious former governor, has agreed to chair it and the committee will be composed of individuals with impeccable reputation."

This committee will screen licence applicants after an initial compilation of applications by the RBI staff, he said, adding that the external committee will make recommendations to the Governor and deputy governors, who will propose the final slate to the Committee of the RBI central board.

Tata Sons, India's biggest business group, and firms controlled by billionaires Anil Ambani and Kumar Mangalam Birla are among the 26 entities that applied for bank licences last month.

Among public sector units, India Post and IFCI have submitted applications. Micro finance institutions such as Bandhan Financial Services and Janalakshmi Financial, too, have expressed their intention to set up banks.

The RBI had issued guidelines for Licensing of New Banks in the Private Sector on February 22 and came out with clarifications in the first week of June. In the past 20 years, the RBI has licensed 12 banks in the private sector in two phases. Ten banks were licensed on the basis of guidelines issued in January 1993.

The guidelines were revised in January 2001 based on the experience gained from the functioning of these banks and fresh applications were invited. Kotak Mahindra Bank and Yes Bank were the last two entities to get banking licenses from the RBI in 2003-04.

In the 2001 round of guidelines for new licences, the external committee members were C G Somiah, former government auditor CAG, I G Patel, former RBI Governor, and Dipankar Basu, former head of State Bank of India. 

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