Finance Minister P Chidambaram has said that companies fulfilling the banking regulator’s guidelines should quality for banking licences. The Reserve Bank of India (RBI) is expected to issue final rules on new banking licences to private entities in the coming weeks.
“The RBI has drawn up draft guidelines, guidelines say that more licences will be given to the private sector... the governor told me he will give out guidelines in two weeks,” Chidambaram told Reuters Television in an interview in London on Tuesday: “Whether any corporate or any kind of corporate will be excluded I cannot say.”
“But if the guidelines are made out and transparently spelt out and if a corporate satisfies those guidelines, I don’t see any reason why a corporate should not be given a licence.”
The central bank had issued a draft set of guidelines in August 2011 barring entities with 10 per cent or more income or assets from real estate, construction and broking activities from starting banks. RBI is understood to have sent the guidelines to Delhi for vetting by the finance ministry. Chidambaram said in the interview that checks would be put in place to prevent misuse. “There will be clear firewalls and red lines which cannot be crossed.”
The finance minister also said that the Budget next month will be a “responsible” one as general elections are 15 months away. Addressing global investors, on the fourth leg of his overseas roadshow that began last week, he said the government will implement many of the decisions and changes in the run-up to the polls. Chidambaram expressed confidence that foreign investment flows into India will improve after these roadshows which have shown that India has enormous goodwill.
Chidambaram said during the meeting in London, investors expressed reservations over political stability and capacity of the government to take reforms forward.
“I assured them that the polls are 15 months away and that the Budget that will be presented in February will be a responsible Budget, that we will implement many of the decisions and changes in the run-up to the polls,” he said after the meeting.
Chidambaram said there is no reason for investors to doubt that “in the run-up to the polls, we will be anything but responsible”. The finance minister said after the roadshows in the four cities “there is enormous interest in India. There is enormous goodwill for India, that India must get back to the high growth path and they want us to recapture what we achieved between 2004 and 2009. I am very positive and I am very hopeful”.
Maintaining that foreign direct investment (FDI) are robust, he said figures till October show that it continue to be good. “But I think after these road shows in Hong Kong, Singapore, Frankfurt and now in London, I think FDI interest will improve and FDI flows will improve,” he said.