Millennium Post

‘RBI sought EC nod on bank licences as matter of caution’

‘I think (it) is to make sure that any such announcements are not tinged by uncertainty. That’s why it is important to ask the Election Commission whether this meets with the code of conduct.

‘Think of it as caution, you might call the caution excessive but it’s important to follow the process,’ he told reporters here when asked about the reasons for approaching the Election Commission before issuing new bank licences to the private sector. Rajan said that the Commission is yet to respond to the RBI’s request.

According to Election Commissioner H S Brahma, the Commission would take a view on the issue of grant of new bank licences by RBI on March 31. Asked whether new bank licences will be issued on March 31, Rajan said, ‘I don’t know.’

On the concerns of the Election Commission with regard to issuance of licence, Brahma had on Wednesday said, ‘Our concern is simple, if you have done your job properly... if they are very confident about their rules and regulations, why should they refer to us? Point is that, if they have done their job thoroughly, honestly, diligently, they should not have referred.’

He had further said that if everything with regard to new bank licences were decided in 2013, then what prevented the RBI from issuing them. The RBI sought the Commission’s nod as the model code of conduct came into force with the announcement of general election on March 5.

The final guidelines for setting up new private banks were issued in February 2013. The last day for applications was July 1. The RBI received 27 applications and subsequently Tata Sons Ltd and Value Industries Ltd withdrew.

Public sector units India Post and IFCI and the private sector Anil Ambani group and Aditya Birla group are among the 25 players in the fray for bank licences. Bajaj Finance, Muthoot Finance, Religare Enterprises and Shriram Capital too have applied.

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. Kotak Mahindra Bank and Yes Bank were the last two entities to get banking licences from the RBI in 2003-04.
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