Issue new licences, FM tells RBI

Says central bank acknowledges govts position and will take process forward

Finance Minister P Chidambaram made it clear to RBI that it has the powers to issue new bank licences and expressed hope it will take the process forward “appreciating” the government’s position.

“Let me emphasise that the three powers that RBI wants are already there with the RBI. It is already there in the regulation; it is there in the powers to grant the banking licences.”

“I am sure the RBI acknowledges and appreciates the well-considered position of the government and will take the process forward,” he told reporters after inaugurating the two-day annual national banking summit (Bancon 2012) here. The Finance Minister said amendments to the Act are simply to formalise powers that the central bank is seeking and bring them together into the legislation.

Formal reply

Asked whether RBI has formally responded to the Ministry that new licences could not be issued without the Bill being passed, Chidambaram said, “Well, I don’t know if a formal reply has been received to the letter that we sent 10 days ago. I don’t know what their formal position is.” Asked whether he is confident of getting the Act passed in the ongoing winter session of Parliament, the Minister replied in the affirmative. “I am pretty confident that the Banking Regulation Act will be passed as early as possible,” Chidambaram said.

“Even if the RBI picks up the thread and resumes the process that was started about a year ago of finalising the guidelines and issuing the first licence, that is going to take six to eight months and the occasion to invoke these extraordinary powers will not come the next day,” he said.

“The occasion to invoke these extraordinary powers will come only when that bank does something wrong. And that is not going to happen one day after the licence is granted.

“Therefore, by the time the occasion arises, the powers will be there in the Banking Regulation Act. So as stated by the then Finance Minister’s Budget speech, we must take the process of finalising the guidelines and receiving applications for new bank licences as early as possible,” he said.