RBI asked to finalise new bank licence guidelines: FM

MDT/PTI 15 November 2012

Chidambaram said his ministry has urged the central bank to proceed to finalise the guidelines and proceed to receive applications for new banking licences in anticipation of the amendment in the banking regulation act

New Delhi: Finance Minister P Chidambaram on Thursday said he has asked the Reserve Bank of India (RBI) to finalise guidelines for new bank licences and start accepting applications for the same pending passage of the Banking Laws (Amendment) Bill, reports PTI.

"...we have written to the RBI recently urging them to proceed to finalise the guidelines and proceed to receive applications for new banking licences in anticipation of the amendment in the banking regulation act," he told reporters after reviewing the performance of public sector banks.

As per the RBI's draft norms released in August 2011, private sector entities or groups owned and controlled by Indian promoters, with diversified ownership, sound credentials and integrity, and having successful track record of at least 10 years, would be eligible to promote banks.

"We have written to the RBI and hope that the RBI will pick up the thread and finalise the guidelines and start receiving the application," Chidambaram said.

The Minister said the "power or the authority" which the RBI wants is already available in the other provisions of the law and with the central bank's own regulations and guidelines for new banking licenses.

"We are only formalising them by amending the banking regulation act. And I have assured the RBI that banking regulation act will indeed be amended, hopefully in the Winter Session (of Parliament), if not in the Winter Session then in the Budget Session," he added.

He further said if RBI proceeds to receive application and process them, even then the first banking licence is not likely to be issued in the next six or eight months.

"So by the time the licence is issued and the banks comes to existence and the banks begin to function, the banks regulation act would have been amended," the Minister said.

The draft norms have pegged the minimum required capital for promoting bank at Rs500 crore and restrict foreign shareholding at 49% for the first five years.

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M G WARRIER

1 decade ago

FM must be having reliable sources to confirm his feeling. If an amendment is not necessary to ‘give’ the powers sought by RBI(which include powers to supersede the board, to authorize the acquisition of shares beyond five per cent as well as powers for consolidated supervision and dispensation necessary to deal with companies that entered the banking sector), why not convince RBI about the position? During October, reports were there that FM had asked RBI officials whether the banking regulator could be given these powers without an amendment to the Banking Regulation Act. RBI Governor said in an interview on October 31 that RBI could not offer an informed response to this query from FM, because RBI believed that it needed those powers. North Block seems to have ignored the message in Dr Subbarao’s comment. The message was, RBI would be happy if the powers come through legislative amendment. The powers ‘given’ outside the Act provisions could be with stings and can also be taken back in a different situation through the same process(without legislative process). Statutory bodies like RBI should not be at the mercy of officials in ministries for the powers they are expected to exercise. RBI has burnt fingers on such issues earlier due to blurred clarity in communication.