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The January deadline for awarding of licences for new banks might get stretched, it would appear.
The date was set by Reserve Bank of India (RBI) Governor Raghuram Rajan on his first day in office. In the first phase, a committee chaired by one of his predecessors, Bimal Jalan, is to vet the 26 applications. The panel is to have its first meeting this Friday.
However, RBI is still collating information on all the applicants and the process is taking time. The central bank wants additional information of the promoters and their group companies, among other things. “It wanted to know the source of funds for the promoter group, income tax records, funding sources and track record of various group companies and balance sheets for more years,” said a person familiar with the development.
Communication with all applicants is on. A format for the extra information has been given, to be filled as annexures to the original application. RBI also wants to know the source of funds for entities which plan to invest up to five per cent stake in the proposed banking entity.
In the initial screening by the Jalan panel, the aim is to ensure a check on primary eligibility, that the “fit and proper” criteria is met by all. The committee also has C B Bhave, former head of the Securities and Exchange Board of India; Usha Thorat, former RBI deputy governor and RBI board member Nachiket Mor.
On Friday, the panel is to decide the screening parameters. It will, when its task is over, send the recommendations to RBI; the latter will decide on the licences. Sources say the government is keen the latter are awarded before next year’s Lok Sabha election; if possible, by the end of the financial year (March 31). Those chosen then get 18 months to set up the new banks.
“I hope to announce the licences within, or soon after, the term of Deputy Governor Anand Sinha, who has been shepherding the process. His term expires in January 2014,” Rajan had said on September 4, the day he took charge of the central bank.
The applications have come from a wide range, from conglomerates to micro lenders. RBI has deployed additional hands to screen these. Apart from officials of its department of banking operations and development, which drafted the licence norms, around 20 others are learnt to be involved.
Tata Sons, Larsen & Toubro and the Aditya Birla Group are among the applicants, plus non-banking finance companies and microfinance institutions. The process to grant licences began in 2010. It is after a little more than a decade that the country will see new banks.
