RBI must give bank licences to corporates with proven record
Oct 07 2013 , New Delhi
"Private banks' entry has only made banking sector more competitive ever since their operations came into being," PHD Chamber President Suman Jyoti Khaitan said.
Private banks have made state-owned banks more aggressive in product innovation and customer retention by offering better service quality, thereby making a strong case for interested corporate houses with established credentials to be issued new bank licences, he added.
A parliamentary panel last month opposed the new bank licences to corporate houses and voiced concerns over the discretionary power vested with RBI for applying 'fit and proper' criteria for deciding on applications.
The Parliamentary Standing Committee on Finance, headed by former finance minister and BJP leader Yashwant Sinha, expressed concerns that the "corporate wave" may harm the interest of banking sector in the country.
Tata group, India's biggest business group, and firms controlled by billionaires Anil Ambani and Kumar Mangalam Birla are among those which applied for bank licences.
Among public sector units, India Post and IFCI have submitted applications. Microfinance institutions such as Bandhan Financial Services and Janalakshmi Financial, too, have expressed their intention to set up banks.
Currently, the central bank is in the process of issuing new bank licences for which it has received applications from 26 public and private sector entities. The RBI is likely to issue the licences by January 2014.
The apex bank has already set up an external committee of financial sector experts, headed by former RBI Governor Bimal Jalan, to scrutinise the current applications.
In the past 20 years, the RBI has licensed 12 banks in the private sector in two phases. Ten banks were licensed on the basis of guidelines issued in January 1993.
The guidelines were revised in January 2001 based on the experience gained from the functioning of these banks and fresh applications were invited. Kotak Mahindra Bank and Yes Bank were the last two entities to get banking licences from the RBI in 2003-04.