The RBI is unlikely to issue any new bank licences this fiscal as an elaborate process, involving multiple?agencies, to scrutinise the applications received by it has just been initiated and is bound to take at least another six months, according to finance ministry sources.?
With the exit of Tata Sons, there are now 25 applicants in the fray including who have over 500 entities operating under them, the sources told FE. The list includes corporate groups such as Reliance-ADAG, Larsen & Toubro, Aditya Birla and Bajaj.
They said around 34 government departments, including ministries of home, petroleum, corporate affairs, finance (department of economic affairs), Enforcement Directorate, Intelligence Bureau, Research and Analysis Wing, Directorate of Revenue Intelligence, CBI, Central Economic Intelligence Bureau, other financial sector regulators such as Sebi, Irda and PFRDA, Trai, Delhi Electricity Regulatory Commission and Delhi Metro Rail Corporation, have been asked by the RBI to give their inputs regarding the conduct of one or the other of these applicant corporate groups in their existing businesses. ?
However, due to delays in the receipt of comments from these regulators and agencies and in the absence of?due diligence reports, the department of financial services recently sent these agencies reminders to expedite the process, the sources said, adding that a couple of months ago, the RBI had also asked these agencies to submit their comments. Any adverse remark from these agencies is bound to hurt the prospects of the applicants, they said, pointing to the importance of the responses sought. ?
Initially, the finance ministry had expected the RBI to issue the new bank licences by this fiscal end (March 2014).
RBI governor Raghuram Rajan had said the banking regulator will try to issue new bank licences within, or soon after, the term of deputy governor Anand Sinha, who is ‘shepherding’ the process, expires in January 2014.
However, the sources said since the process includes the RBI’s scrutiny?and a screening by an external panel led by former RBI governor Bimal Jalan, the ministry now feels that the issuance of licences may spill over to the new fiscal or could even be after the formation of a new government at the Centre (following general elections in April-May).
On December 11, Jalan said his expert panel will submit a report only three months after the RBI finishes the basic scrutiny. He had also said that timeline per se is not that important, adding that, “they (new banks) are going to deal with public money. Therefore, we don’t want to rush. We will take a decision which is in public interest.”
The licence guidelines say the assessment of? the ?fit and proper? status of the applicants includes promoters / promoter groups having sound credentials and integrity, and that their businesses should not potentially put the bank and the banking system at risk on account of group activities. Besides, the bank will be allowed to set up only through a wholly-owned non-operative financial holding company, and the objective of this is to ring-fence the regulated financial services entities of the group, including the bank from other activities of the group, the RBI said.
