'Not all eligible applicants may get bank licence'

RBI to study applications for 3-4 months

Asserting that it will accelerate the process of issuing new bank licences, Reserve Bank today said it was possible that not all eligible applicants will be granted a licence.

"We will try to accelerate the process... We will look at the applications and then decide. It is still possible that not all eligible applicants might get licences," RBI Governor D Subbarao told reporters here.

Earlier this week, RBI announced that 26 entities, including Tata Sons, LIC Housing Finance, Aditya Birla Nuvo, Department of Posts, Reliance Capital, L&T Finance and Bajaj Finserv applied for grant of bank licences.

"... Over the next three to four months, we will do an internal evaluation of the applications to check them for their completeness and get any additional information that we might need," Subbarao said.

He said an external committee would then screen the applications and make the recommendations.

"The Reserve Bank will then make a decision on the final licences. The number of final licenses to be given we have no number at the moment," Subbarao added.
The Reserve Bank is expected to grant new licences by March next year.

India has 26 public sector banks, 22 private sector banks and 56 regional rural banks.
Ten banks were licenced 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.

Finance Minister P Chidambaram on Wednesday said no preference will be shown to applicants and government will have no say in the issue of licences. "There is no preference. All the guidelines have to be satisfied... government will have no say in the selection of the applicant who will get a bank licence. We are not entertaining any sifarishes (recommendations) of the applicants," he had said.

"Well, the objectives of monetary policy are price stability, growth and financial stability as we have said several times. And growth also subsumes employment generation. The challenges for monetary policy is to balance between these objectives," Subbarao said.

"We have great regard for what the Finance Minister has said and we have great regard for what the government is saying. And in taking the monetary policy decision every six weeks, we (do) counter balancing of these objectives, he said.

"The short point is we are very conscious of the need to be supportive of growth but supportive of growth in an environment of price stability and financial stability," he said.

Earlier this week, Chidambaram said RBI should not focus solely on containing inflation but also look at the larger mandate of growth and creation of jobs.

To promote growth, RBI reduced short term lending rate or repo rate by 1.25 per cent since 2012. However, commercial banks have reduced their rates only by 30 basis points.