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26 in queue for bank licence
Tue,02 Jul 2013 00:54:00 0530
26 in queue for bank licence

The 13th floor of the Reserve Bank of India headquarters in South Mumbai on Monday
saw an unusual sight: Many visitors carrying huge cartons filled with documents lining
up before the office of Chandan Sinha, chief general manager-in-charge, department of
banking operations & development.

The documents, some running into more than 20,000 pages, were part of the applications
for banking licences, the deadline for which expired on Monday.
A total of 26 applications were received, including those from the usual corporate
heavyweights like L&T, the Tata group (Tata Sons has applied, not Tata Capital),
Reliance Capital, Aditya Birla Nuvo, Bajaj Finserv, Videocon (in the name of
Aurangabad-based Value Industries), apart from infrastructure financier IDFC, gold loan
company Muthoot Finance, realty developer Indiabulls, micro financier Bandhan and
Bangalore-based Janalakshmi. SKS Microfinance, India’s only listed microfinance
company, was absent, though its chief financial officer had said it would consider

Among surprise entries were Noida-based little-known Smart Global Ventures and
Gurgaon-based advisory services firm INMACS Management. UAE Exchange India, a
remittance and foreign exchange services firm and Suryamani Financing, part of the
Kolkata-based Pawan Kumar Ruia group also joined the fray.
The Department of Posts, Tourism Finance Corporation and government-owned financial
institution IFCI were among the public-sector entities that applied.
Apart from these, India Infoline, Religare, Edelweiss, Magma Fincorp, Muthoot Finance
and SREI Infra Finance were also on the list of aspirants. In a statement issued on
Monday, India Infoline said former Corporation Bank chairman, V K Chopra, would
head its banking foray.
The central bank has not formally communicated how many licences it will issue but
sources indicate the number is unlikely to exceed eight.
This is the first time in more than a decade that banking licences will be issued. This is
also the first time that corporate and industrial houses are being considered for entering
the sector. Earlier, new banks had been allowed to be set up on the basis of 1993
guidelines and 2001 norms.
While the banking regulator has not set a timeline by when it will issue the licences,
finance ministry officials indicate those are likely to be given by the end of the current
financial year. After the expiry of the deadline on Monday, the applications will now be screened by
RBI to ensure prima facie eligibility of applicants. After the screening, the applications
will be referred to a high-level advisory panel to be set up by RBI. The committee will
comprise eminent people with experience in the banking & financial sector and other
relevant areas. The constitution of the committee, which could ask for more information
from the applicants, has yet to be announced.
The high-level panel will submit its recommendations to RBI for consideration. After
getting in-principle approval, an entity will get 18 months to set up a bank. RBI had also
clarified that new banks will have to comply with all the norms regarding reserve
requirements and priority sector from their inception.
According to RBI, private players aspiring to enter the banking space need to create a
non-operative financial holding company (NOFHC).
“The requirement is that not less than 51 per cent of the voting equity shares of the
NOFHC shall be held by companies in the promoter group, in which the public hold not
less than 51 per cent of the voting equity of such companies,” RBI had said in its
clarifications on final guidelines for new banking licences.

(Business Standard)
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