RBI may issue new bank license guidelines in four-six weeks

Reserve Bank may release its final guidelines for new bank licenses by January-end or early next month

New Delhi/Mumbai: The Reserve Bank of India (RBI) is likely to issue final guidelines for grant of banking licences to new players within the next four-six weeks, while those interested in setting up new banks, including giants like Reliance, Religare and L&T groups, have begun doing the groundwork, reports PTI.


According to sources in Finance Ministry, the Reserve Bank may release its final guidelines for new bank licenses by January-end or early next month.


The Finance Ministry is currently in the process of sending its final comments to the RBI on the draft guidelines issued by the central bank on the matter, after which the final guidelines should be announced.


The RBI is already in the process of collating the comments received from various stakeholders on the draft guidelines.


RBI Deputy Governor Anand Sinha, who is incharge of the Department of Banking Operations and Development at the central bank, is scheduled to retire next month and RBI should finalise the norms before his retirement, sources said.


A number of large corporate houses, including Anil Ambani-led Reliance Group, financial conglomerates Religare and Shriram groups, engineering-to-technology major L&T group and Aditya Birla group, are said to be interested in entering the banking business depending on the regulatory framework.


Industry sources said that most of the banking aspirants have begun doing their groundwork and quite a few large corporate houses are confident of meeting the regulatory framework despite some voices being raised in certain quarters about concerns of possible conflict of interest in case of industrial houses being given banking permits.


Last week itself, noted economist and Nobel laureate Joseph Stiglitz said corporates should not be allowed to enter banking space as it has the potential to create conflict of interests.


However, experts back in India dismiss the concerns and say that bank licenses should be given to those who can safeguard the interest of consumers and ensure liquidity, irrespective of them being a corporate house or anything else.


"Bank licence should be given to promoters with strong track record and credence irrespective of being a corporate house or an NBFC, as depositors interest is paramount. RBI has guidelines in place which is best across the globe and is testified by the fact that very few banks have failed in the country," said eminent Chartered Accountant S Ravi, who is on board of various public companies.


Noted economist and former Secretary General of apex industry body FICCI, Rajiv Kumar, also said a strong regulatory framework can take care of the conflict of interest issue.


"As long as there is high quality regulation, the apparent conflict between corporate interest and banking interest can be resolved and, I think, if corporates willing to get into banking sector can create a firewall between their corporate interest and financial interest it should be fine," he said. .


After delivering a lecture organised by the Reserve Bank of India in Mumbai last week, Stiglitz said the real problem in the financial sector were issues of conflict of interests.


"And when you have corporates opening their own banks, you are opening a venue for conflict of interests," he said.


SMC Capitals' Equity Head Jagannadham Thunuguntla said even the draft guidelines and discussion papers have enough safeguards.


"I believe RBI is one of the best regulator in the world. So in that sense corporates getting a licence is fine. Earlier Kotak had got banking license and they did well. So there is no problem with corporates getting into banking," he said.


Stiglitz also praised the RBI for doing a commendable job in its management of banking regulations and said the need of the hour is not over-regulation but right regulation.


He, however, said the argument of bringing 'economies of scale' by giving licences to corporates did not hold water as the "dangers of conflict of interest outweigh any economies of scale that it can bring up."


Drawing parallel between the debate in the western world regarding the conflict of interest with respect to separation of investment banking and pure banking operations, he said that a Chinese wall can not be created between the two.


Rajiv Kumar said the "criteria for eligibility should be a good track record and some minimum networth that they have and their some demonstrative ability to run a financial institution."


"So if they have done something in the insurance sector or the NBFC sector etc then they should be given a preference," he said.


In a major step to reform India's banking sector, the Lok Sabha last month passed the Banking Laws (Amendment) Bill, 2011, paving the way for establishment of new private banks among other measures.


The RBI had issued draft guidelines in August 2011 for issuance of new banking licences, while in July 2012 it released the comments and suggestions received by it. However, it wanted the government to amend the banking laws before starting the process towards issuance of new banking licences.


Among the major groups interested in seeking new banking licenses, Religare Enterprises' chief Shachindra Nath said, "It is important that new banks are brought in to contribute towards the overall financial inclusion and development agenda."


Nath said Religare was waiting for RBI to come out with its final guidelines post which it would evaluate how to align its banking business model with the regulatory intent.


Another banking aspirant L&T Finance's President and Wholetime Director N Sivaraman as also said that his company has a vision of being a comprehensive financial services provider and the banking license has a potential to enable it provide all products and services. .


"Currently we are a lender with some other services, but with deposits and other banking services, we shall get to interact with all customers on all grounds and would wait for the final guidelines of RBI," Sivaraman said.


Reliance group is another entity to have shown its interest in starting new banks ever since a proposal was floated about two years ago to issue new licences.


Addressing the shareholders of the group's financial services arm Reliance Capital in 2011, Anil Ambani had went on to say that the group's banking entity could be called 'Reliance Bank' depending on the regulatory framework.


Reliance Capital CEO Sam Ghosh also recently said the group is full-prepared from its side for banking foray and it has been working on this for quite some time.


Are you trapped in toxic ULIPs? Blame IRDA – Part II

Insurance policyholders trapped in toxic ULIP products are still paying the price for products approved by IRDA and then banned in September 2010. Where do the policyholders of these inherently flawed insurance products go after losing up to 100% of their investment? Is IRDA listening?

Anuj Sharma (name changed) wrote to Moneylife last year. He says, “I have been mis-sold a ULIP (unit linked insurance plan) for which I am paying a premium of Rs25 lakh a year to Metlife India Insurance through Axis bank. I was told I will get a 10% return on paying three premiums and withdrawing my Rs75 lakhs after three years. However, just before I paid my third premium, when I checked the value of the policy, it was only Rs21 lakh against Rs50 lakh that I had paid. I could not believe that the first premium was totally taken away as cost by the insurance company. The plan is called Met Growth and the fund option is 100% in debt. All communication with insurance company is with me on email, but the company has simply refused to refund me the money. IRDA (Insurance Regulatory and Development Authority) got back saying I need to file with the insurance ombudsman first, but the ombudsman replied saying that it will not take up the case.”

While Anuj has to blame himself for buying a product without understanding it, how can IRDA approve a product wherein the first year premium just vanishes in thin air? Met Growth ULIP eats 100% of the first year premium. The money comes back in terms of guaranteed loyalty additions (50% of first year premium at end of 10 years, 70% of the first year premium at end of 15 years). It means that you will get 120% of the first year premium by end of 15 years, if you have paid all the premiums and the policy is in-force. Anuj will have to pay Rs25 lakh every year for 15 years to ensure that his first year premium comes back to him!

IRDA came out with new ULIP regulations in September 2010. But, what about toxic old ULIP policies that are still in force and cleared by the regulator? Where do these people like Anuj Sharma go? Why are they paying for mistakes of the regulator approving such toxic products? If IRDA can have new regulations protecting the insured for getting back the funds of a discontinued policy after earning bank savings interest rate (4% p.a.) till the lock-in period of five years, why can’t it be made applicable to customers trapped in old ULIPs? Levying charges without proper justification is like a day-light robbery done by old ULIPs under the approval of IRDA.

Another Moneylife reader has written the following, “In January 2008, then bank manager of Centurian Bank of Punjab and a couple of Aviva reps deceitfully sold Aviva Life Saver Plus policy to one of my relative, who is a widow. She thought her money (Rs15 lakh) is being invested in a scheme where she will get a steady income of about Rs15k - 20k monthly to look after her two minor kids’ educational and other household expenses. She trusted the bank manager as she has been banking at the same location for a number of years. She was advised to sign the back page of the application and the rest formalities will be filled by them. She will start getting her investment return in a month or so.”


“Not aware of the application contents, the annual premiums and the administration charges for ULIP, she was shocked to know that her annual premiums are Rs15 lakh for the next 10 years (instead of only one year). In addition her investment is being depleted through various charges levied by Aviva as well as due to the market fluctuation. Needless to say that the bank manager and others are no longer with the bank and Aviva customer service is playing to its own tune.”


The problem is that in many old ULIPs, customers almost lost everything if they did not pay the three premiums. Aviva Life Saver Plus policy has surrender charge of 90% if only one premium was paid; 75% if only two premiums paid and 50% if only three premiums paid. The surrender charge goes to zero only when more than five premiums have been paid. Many old ULIPs had such customer unfriendly surrender charges.


What relief can IRDA bring to customers who lost almost their full investment due to toxic products and intermediaries fooling customers by trapping them with regular premium payment option to earn higher commission? Surely, some kind of negotiated settlement should be forced by IRDA onto insurance companies in these rare cases of extraordinary hardships faced by policyholders based on the quantum of money they lost just as “charges”.


In the third part of the article we will talk about how lapsed policies of Anuj Sharma and others significantly add to the insurance company’s profits.


Read - Are you trapped in toxic ULIPs? Blame IRDA – I



Sucheta Dalal

3 years ago

Reading all the comments here, I would strongly suggest that you read some of Moneylife's cover stories on insurance.

Or watch youtube videos of Raj Pradhan's presentations. Look under events at


3 years ago

Aviva cheats its customers and they were actually stealing consumers money.My policy no. is ALS2386124.The aviva is cutting direct 50% from my fund value after 5 years also in which the locking period for unit linked plan is only 3 years and i have paid premium regularly for 3 years.The company, s agent told me if i should pay Rs.90000 as premiums of Rs.30000 for 3 times and i will get Rs.180000 and what i really get is only Rs.30000.Never invest in AVIVA(THE CHEATER, S COMPANY).


Sucheta Dalal

In Reply to bibinv 3 years ago

You may want to send a formal complaint through Moneylife's insurance helpline which is listed to the right of this page. But remember, it is on a best effort basis -- although FREE.
Some companies value their reputation , some dont, so we will check them out if you make a formal complaint to Moneylife Foundation.


4 years ago



4 years ago


swapnali vivek kinjawadekar

4 years ago

Even I have faced the same problem with Kotak Life Insurance. My 3 years lock in period is over; and when i wanted to take out money they are saying I will get my first whole year premium at the end of 20 years if the policy is in force ELSE they will eat my first year premium as charges/cost by the company. Till now I have paid 36000 (monthly premium as Rs. 1000 for 3 years), but value they are refunding me is 21000 - surrender charges of 4% = 20160. ULIP plans are just to squeeze investers money and trouble him worsely. I am not going to invest in any private insurance companies in future. This is the worst experience and lesson for me.


4 years ago

Only one thing is required to be done is to allow Insurance Companies to charge only 2% upfront and annual fund management charges and to the business. There is no need to pay high commission to the Agents and there is no need to seel anything free without any commission also. Make 2% commission rate on Insurance, Mutual Funds and .5 to 1% in case of other products. It can be even lower for products and then those who want to work will work. All all individuals to sell all products from all insurance companies and allow banks also to sell products from all insurance companies and let the public also know who understands better because it is being told by everyone that bankers are more knowledgeable, transparent in business and ethical in advising their customers than the individual agents. Simultaneously start some kind of licensing, registration, examination to give credibility, identity to the individuals working in this industry and provide recognition so that general public will come to know that these are the people with whom he should deal with to throw out the missellers to some extent.

Coalition of passenger associations decides to take up the matter

Activists concerned about the state of Mumbai's railway system resolved on Saturday to join forces to press the demand for safe and humane commuting within Mumbai


A coalition of activists and organisations working at different aspects of ensuring safe rail travel held their first meeting at Mumbai on Saturday, 5th January.

The meeting identified a few core issues to be actively pursued in 2013 as well as the persons or organisations that would take it up. They are:


  • Lack of safety and the large number of deaths due to inhuman overcrowding of suburban trains was a matter of primary concern for all. Samir Zaveri, who has been the biggest crusader for a wide range of railway-related issues, would lead this effort. Ashank Desai, founder of Mastek Computers and Dr Rita Savla have also been working for the past four years on how best to get proper medical facilities for passengers in the golden hour after an accident. Dr Savla said that their organization is also working at training railway porters to be more sensitive to handling accident victims. It will also continue to work for change at the policy level.
  • To demand that all proposals pertaining to Mumbai, which were a part of former Railway Minister Dinesh Trivedi’s budget must be incorporated in the forthcoming budget. It may be recalled, that Mr Trivedi’s budget proposals were discarded and he was forced to resign after Mamata Banerjee objected to a proposal to raise fares. Now that the Trinamool Congress has withdrawn support to the United Progressive Alliance (UPA), there should be no bar to reviving proposals pertaining to Mumbai, whose income subsidies the larger railway network. Mr Rishi Aggarwal of the Observer Research Foundation will lead this effort.
  • To press for optimization of the train frequency on the Mumbai suburban rail network to make the best use of improved technology, new rakes and better equipment. Mr Dipak Gandhi, Chairman of the Mumbai Suburban Railway Passengers' Association, who has been crusading the cause of railway activists for decades agreed to lead this effort. Mr Gandhi had railway timetables going back to 1937, which show that trains were run at a better frequency many decades ago without the benefit of modern technology and computerization.
  •  Raising the height of platforms to reduce deaths and accidents was another issue that is a priority. Advocate and former national cycling champion Bapoo M Malcolm agreed to lead this effort along with transport activist Sudhir Badami, Samir Zaveri and his associates.  
  •  Gaurang Damani, who has already filed a public interest litigation in this regard, will pursue the safety aspect by pressing for closed boundary walls to prevent trespassing and encroachment around railway stations. An interesting issue that came up during the discussions was that a majority of deaths are passed off as trespassing in order to cover up the tragic fact that people have been falling out of trains due to inhuman over-crowding. Mr Shashikant, Secretary of the Mumbai Suburban Railway Passengers' Association will also lead this effort through his organization.
  • Another major issue which has been causing much frustration among Mumbaikars are the frequent megablocks when trains are stopped for repair and maintenance work. While nobody denied the need for the work, the bungling and callousness that had crept in, has increased passengers misery. The megablock on the central railway line over the New Year weekend, has caused several deaths and led to long delays for at least three days after the work was completed. Mr Samir Zaveri has already filed a complaint against Railway General Manager Subodh Jain, seeking a FIR to be filed with the railway police in this regard. While the action has perturbed railway officials, it is hoped that this will make them more accountable and force them to plan work with more care.


The Coalition will be open to all individuals and organisations who want to support safe and humane rail travel. It seeks the association of experts and retired railway executives. The group will meet on the first Saturday of every month between 3pm to 5 pm and is open to all. Moneylife Foundation ( will be the convener of the group.

Mr Piyush Goel, Member of Parliament (MP) Rajya Sabha attended the meeting and promised to support the group by helping to make their voice heard by policy makers. He felt confident that the new Railway Minister, Mr Pawan Kumar Bansal was sincere about making a difference and would be willing to give a fair hearing to issues that are cogently argued and backed up.

Everybody agreed that the task on hand was gigantic an would require a lot of support, but small incremental successes based on doable projects was the way forward.



rajesh verma

2 years ago

The only solution to this overcrowding is to have more tracks. During morning peek hours six tacks to operate for south bound trains and reverse this arrangement during the evening peek hours. The authorities should realise that a large number of working class living in north Mumbai come to south for their livelihood.

nagesh kini

4 years ago

I'm a rare rail traveler.
On talking to a lady at my banker she spoke to me about a common at the same time a serious problem of people who have to board trains at starting points. This happens generally at Borivili and Virar, may be from Thane and another terminii.Passengers from stations before these stations board the seats and prevent genuine passengers boarding from the starting stations who have to stand all the way.This lady requests some one takes this up with the Railways. I've asked her to make out a request signed by others similarly affected to enable me to submit it at ML.


Akshay Iyer

In Reply to nagesh kini 4 years ago

Hello Mr. Kini! Yes, this kind of occurrence is a common feature in Mumbai local trains and hence it is not coming to me as a surprise. However, I'd like to help you in taking this matter forward.

Sachin Purohit

In Reply to nagesh kini 4 years ago

To be fair to the people who board from the station prior to the starting point - they do so because they themselves don't want to be the ones who have to fall out of inhumanely overcrowded local trains. Put yourself in their shoes, and you will realize that you too might do the same thing. The root cause is that we Mumbaikars are funding the railway budget in a big way and yet we do not get a better frequency of trains. Fight for a better train traffic and all such issues would get addressed automatically.

nagesh kini

4 years ago

I'm a rare rail traveler.
On talking to a lady at my banker she spoke to me about a common at the same time a serious problem of people who have to board trains at starting points. This happens generally at Borivili and Virar, may be from Thane and another terminii.Passengers from stations before these stations board the seats and prevent genuine passengers boarding from the starting stations who have to stand all the way.This lady requests some one takes this up with the Railways. I've asked her to make out a request signed by others similarly affected to enable me to submit it at ML.

chandra shekhar

4 years ago

*1 the traffic on rail, for outbound and inbound (to-n-fro various STATES) must end at *Virar, *Kasara, *Khandala ... suggesting the satellite junctions to shift !

*2 all the old rail-n-sleepers under the rail need to be replaced, with new ones !!

*3 encroachments on both the sides of rail-tracks must be STOPPED once n for all !!!

*4 create more rail-n-road tracks, parallel to each other between *Virar, *Kasara, *Khandala and MUMBAI, in order to accomodate more local-trains & BEST buses ( giving level playing to both, & prices on travel remains same) !!!!

*5 do not allow excess baggages
in local trains ... their timings can be deferred between
9pm to 6am, by introducing special brake-van local-trains into the system !!!!!

*6 for safety-n-security, introduce queue system as is prevalent in BEST services, hire
people from Ex-defense Forces and make best use of their training in "disciplining" the local-commuters !!!!!!

*7 increase number of local-trains, rail-tracks, brake-vans trains, BEST buses and above all
"efficiency" in the whole Rail-System !!!!!!!

*8 do not at any point in time,
encourage "over-crowding" and not to encourage Builders to construct buildings near the rail-tracks on both its sides !!!!!!!!



4 years ago

Issues like road and rail safety normally do not get a priority in mainstream media reporting unless these could be sensationalized. Moneylife is an exception. Generally, my LTTEs(Letters to the editor) on a variety of subjects generally get published by newspapers. I am unlucky, when the subject matter is Railways. Two sample letters, which are relevant in the present context, which didn’t get published, are reproduced below:

I-Neglected class

The protest by passengers at Kurla Terminus on Wednesday ( July 21, 2010) should open the eyes of all marketers and service providers who dump third quality products and services on customers who have no choice in the given situation. Whenever someone points out inadequacies, Railways particularly plead helplessness referring to the increased number of passengers they are made to cater to with limited infrastructure and manpower.

That the problem has reached the breaking point is evident from the increasing number of casualties in accidents caused by bad maintenance, overloading of compartments in suburban locals and lack of concentration on the part of staff who are made to work shift after shift without mandatory breaks for rest.

As regards the Lokmanya Tilak Terminus (LTT) episode, another related issue deserves mention. That is the Railways’ neglect of satellite junctions created for reducing pressure at main stations (in this case, CST, Dadar, Mumbai Central) in the matter of providing services, maintenance and ensuring other linkages. The difference in treatment can be seen even in the routes allotted for such stations.

The protest by passengers on Wednesday should be seen in this backdrop and authorities should provide comparable facilities and comforts for passengers traveling from stations like Kurla Terminus as Railways are charging fares at the same rate whether the train travels between CST and New Delhi or between LTT and H. Nizamudeen.

M G Warrier
June 28, 2010

II-Indian Railways

Indian Railways, with about 70,000 route kilometers and more than 8000 locomotives is one of the largest rail-systems in the world. In accepting modern technology and introducing better safety networks and practices also, Indian Railways have made much headway in the recent past. Konkan Railway and Delhi Metro have become legendary landmarks in its march forward. The massive efforts and deployment of huge funds for providing better transport facilities for the millions of passengers and transporters of goods get shadowed by inefficient handling of on-line supervision of services, inadequate attention to maintenance of tracks, premises and coaches as also loss of lives on the tracks in accidents. When the Railway Budget for 2012-13 will be presented next month, one is tempted to suggest to the Railway Minister to consider a one-time performance appraisal/audit of the working of railways, factoring in the following aspects (the list is only indicative):
• Safety of tracks, bridges and other structures which have outlived their normal life or are giving warning signals. Budget should provide a token allocation for replacement/renovation where necessary.
• Review of accidents during the last, say, five years. Preventive action on the basis of lessons learnt from the accidents, progress in payment of compensation to the survivors of those who lost lives and the injured, rehabilitation measures etc
• With specific reference to Mumbai suburban locals, what best can be done to reduce overcrowding in coaches which also causes death/injury to several passengers daily.
• Amenities that can be considered for smooth flow of passengers to and from platforms and from one platform to another.
• Cleanliness of the premises, inside coaches, availability of water in toilets, quality and cleanliness of linen and food provided/served inside compartments.
This appraisal/audit should be in addition to and not by or through the other ongoing inspections/supervisory arrangements.
M G Warrier, Thiruvananthapuram
January 12, 2012

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