RBI's fresh norms on new bank licences in next 4 months

New Delhi: The Finance Ministry said more players will soon get bank licences as the RBI will come out with fresh norms on new bank licences in the next four months. "Hopefully, in next few months RBI will start inviting applications... RBI will take 4-5 months for preparing the new set of guidelines for on-tap and for differentiated banks," Financial Services Secretary G S Sandhu told reporters here.

In April, the Reserve Bank of India (RBI) had issued bank licences to IDFC and Bandhan Financial Services, out 25 applications. After an hour-long presentation to Finance Minister Arun Jaitley, Sandhu said: "RBI will take 4 months to draft new guideline and then invite applications." India Post was one among the 25 unsuccessful contenders for new bank licences. The applicants also included state-run IFCI and private sector Anil Ambani group and Aditya Birla group, Bajaj Finance, Muthoot Finance, Religare Enterprises and Shriram Capital.

Recently, RBI Governor Raghuram Rajan had said it is committed to freeing entry in banking. "We just announced two new commercial bank licences after a rigorous vetting process. We are examining this experience, and after making appropriate changes, will announce a more regular process of giving licences, what has been termed licenses on tap," he had said. The RBI, he had said, "can take more of a chance with new players if they get the licence to open only a small bank or to conduct only one segment of banking business. Such differentiated licences - licences with restrictions on the geographical reach or the products offered by a new bank - can generate more organisational variety and efficiency".

Small banks tend to be better at catering to local needs, including needs of small and medium businesses, he had said. A payments bank, which will take deposits and offer payment and remittance services but be constrained to invest all its funds in safe instruments such as government securities, could be very synergistic with other existing services, he had said. At present, there are 27 public sector banks and 22 private sector lenders in the country.