Bank licence: RBI may miss deadline | Business Standard

Bank licence: RBI may miss deadline | Business Standard

Online comments, October 31, 2013:

The process for opening some more banks in the private sector was set in motion with the release of a discussion paper on the subject by RBI more than three years back. Like allowing commencement of any other business which is not prohibited by law of the land, ideally, it should have been possible for any individual or organisation to apply for a banking licence and RBI should have been in a position to grant or reject the application based on the need for a bank and the eligibility of the applicant to run a bank. The impression being created is that policy in this regard will be decided by North Block(read Finance Ministry) and Mint Street(RBI) based on their perception of eligibility of applicants for licences, which perception changes on an ongoing basis. Clarity is only on one point which seems to be the government’s anxiety ‘that some licences are awarded before next year’s Lok Sabha election’; if possible, by the end of the financial year (March 31). On August 27, 2013, Reserve Bank of India has released a Discussion Paper on ‘Banking Structure in India – The Way Forward’. The Discussion paper has identified certain building blocks for the reorientation of the banking structure with a view to addressing various issues such as enhancing competition, financing higher growth, providing specialised services and furthering financial inclusion. It has also emphasised the need to address the concerns arising out of such changes with a view to managing the trade off for ensuring financial stability. It would be in the fitness of things if the Jalan Committee appointed by RBI to vet new bank licence applications is expanded and given a mandate to take into account the issues raised in the RBI Discussion Paper of August 27 and give the committee’s views on the eligible candidates from the 26 applicants conforming to the performance needs envisaged in the Discussion Paper and suggest structural changes in the banking system for further policy initiatives. M G Warrier, Mumbai


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