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The RBI has granted in-principle approval for new bank licences to IDFC and Bandhan Financial Services
The Reserve Bank of India (RBI) on Wednesday gave its in-principal nod for new bank licences to IDFC and Kolkata-based Bandhan Financial Services Pvt Ltd.
It must be noted that finance minister P Chidambaram, while speaking at Indian Bank's Association (IBA)’s annual banking conference (BANCON) in Mumbai had hinted "a different bank to cater to North East". This description fits perfectly to Bandhan Financial, which was the only one among aspirants presently operating extensively in the North East.
On Tuesday, the Election Commission (EC) had allowed RBI to take action on new banking license as 'appropriate'. Earlier in the day, affirming that the grant of new bank licences is a regulatory process and not political, RBI governor Raghuram Rajan had said the central bank sought the EC's nod only to shield the announcement from any political controversy.
The process to award new bank licences was initiated in 2011 and it has spilled over to the election season because the due diligence process took a little longer, he said, adding, "All regulatory processes have to come to an end."
There were 25 applicants in the fray for new bank licences, including Aditya Birla Nuvo, Bajaj Finserv, Bandhan Financial Services Pvt Ltd (Kolkata), Department of Posts, Edelweiss Financial Services, IDFC, IFCI, Indiabulls Housing Finance, India Infoline, INMACS Management Services (Gurgaon), Janalakshmi Financial Services Pvt Ltd (Bangalore), JM Financial, LIC Housing Finance, L&T Finance Holdings, Magma Fincorp (Kolkata), Muthoot Finance, Reliance Capital, Religare Enterprises, Shriram Capital, Smart Global Ventures Pvt Ltd (Noida), SREI Infrastructure Finance (Kolkata), Suryamani Financing Company (Kolkata), Tata Sons, Tourism Finance Corporation of India, UAE Exchange & Financial Services (Kochi) and Value Industries (Videocon from Aurangabad).
Tata Sons later withdrew its application.
To recapitulate, in 1969, fourteen large banks in the country were nationalised followed by six more in 1980. Subsequently, RBI gave licences to 12 private banks, in two phases, including conversion of a cooperative bank into a commercial bank. In the second phase, licences were issued to Yes Bank and Kotak Mahindra Bank way back in 2004. So, it is exactly a decade now, the RBI will be embarking on issuing additional licences in the banking sector, as the volume has grown to an estimated Rs80 lakh crore, and is still growing!
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