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  • RBI may issue some banking licences this fiscal: Finmin

    Published on October 27, 2010

    The government said that it expects the Reserve Bank to issue banking licences to some new players this fiscal, with the likes of Reliance Capital, Tata Group and AV Birla Group aspiring to enter the sector.

    “RBI will issue banking licences in due course of time. We hope some of the licences will be issued this financial year,” Financial Services Secretary R Gopalan told reporters in New Delhi on Wednesday.

    RBI had, in August, brought out a discussion paper on giving out new banking licences to business houses and non-banking finance companies to increase competition in the sector, and to formulate regulations for it.

    The apex bank had said it may allow limited entrants, but was apprehensive about the independence and neutrality of banks controlled by industrial houses.

    Besides, it disfavoured the entry of non-banking financial institutions with realty interests, and sought public comments on the issue of entry of private players into the banking arena.

    Among the corporates which are aspiring for the licence are Reliance Capital, Tata Group, AV Birla Group and L&T. Also, NBFCs like Shriram Finance, LIC Housing, Mahindra Finance and IFCI are keen to start a bank.

    Earlier this month, the central bank met representatives from the India Inc, to get industry view on allowing new players in the banking segment.

    In a discussion paper titled, ‘Entry of New Banks in Private Sector’, the RBI also mooted the idea of bringing down the cap on foreign direct investment in banks to below 50 per cent from 74 per cent now.

    When asked about finance Ministry’s take on RBI’s proposal to ask foreign banks to operate as fully-owned subsidiaries, Gopalan said the Ministry would take a view once the central bank comes out with a paper.

    According to banking sources, the RBI may ask foreign banks which have attained a particular asset size to operate as fully-owned subsidiaries, rather than as branches.

    “RBI is coming out with a paper. When they come out we will know the various issues and address it,” Gopalan said.

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