No new bank li­cences sans le­gal back­ing: RBI chief

The Pak Banker - - Front Page -


A day af­ter In­dian Fi­nance Min­is­ter P. Chi­dambaram asked the Re­serve Bank of In­dia (RBI) to speed up the process of is­su­ing new bank li­cences, RBI Gover­nor D. Sub­barao, on Sun­day, said it would be not pos­si­ble with­out ful­fill­ing the en­abling con­di­tions for the same.

"We have been pre­par­ing for launch­ing this process (of is­su­ing new bank li­cences) but all the ground work, all the en­abling con­di­tions for launch­ing this work have to be ful­filled," he told re­porters on the side­lines of a func­tion here.

Mr. Chi­dambaram, on Satur­day, said he had asked the RBI to fi­nalise the guide­lines for new bank li­cences and start ac­cept­ing ap­pli­ca­tions for the same pend­ing pas­sage of the Bank­ing Laws (Amend­ment) Bill.

The last time the RBI al­lowed new pri­vate banks was in 2002, prior to which it al­lowed new play­ers in the mid-90s. The RBI is­sued the fi­nal guide­lines in Au­gust 2011 for en­try of new banks, in­clud­ing those floated by cor­po­rates, but is wait­ing for the nec­es­sary le­gal pow­ers be­fore it pro­ceeds fur­ther. The bank li­cences were ini­tially slated to be is­sued way back in 200809.

The RBI Gover­nor said it would take at least eight-nine months to is­sue the first new bank li­cence if the Act was amended in the Win­ter Ses­sion which be­gins on Novem­ber 22.

The amend­ments to the Act will in­vest RBI with su­per­vi­sory pow­ers over pri­vate com­pa­nies that would en­ter the bank­ing sec­tor. Specif­i­cally, the RBI wants le­gal pow­ers to su­per­sede the board of any new bank­ing player in case of ir­reg­u­lar­i­ties. Amidst de­mand for eas­ing of in­ter­est rate, Dr. Sub­barao, said in­fla­tion was "quite high" at 7.45 per cent even as the bank was con­scious about eco­nomic growth.

His re­marks come as head­line in­fla­tion fell to an eight­month low of 7.45 per cent in Oc­to­ber from 7.81 per cent in the pre­vi­ous month. "At 7.45 per cent, in­fla­tion is cer­tainly quite high," Dr. Sub­barao said, adding the cen­tral bank was al­ways on "high alert" on the in­fla­tion front. The RBI was also con­cerned about eco­nomic growth. "We're al­ways on high alert, high alert about growth, about in­fla­tion cer- tainly," he said.

Ear­lier, in­au­gu­rat­ing an RBI con­fer­ence on 'Lever­ag­ing co­op­er­a­tive ad­van­tage', Dr. Sub­barao said de­spite in­fir­mi­ties, co-op­er­a­tive banks were play­ing a vi­tal role in fur­ther­ing fi­nan­cial in­clu­sion.

He noted that as on April 1, 2012, there still re­mained 41 co-per­a­tive banks which could not meet even re­laxed li­cens­ing norms.

"To main­tain in­tegrity of co-op­er­a­tive sys­tem and pro­tect pub­lic in­ter­ests, the RBI im­posed direc­tions on these 41 banks pro­hibit­ing them from ac­cept­ing fresh de­posits," he said.

He, how­ever, made it clear that the direc­tions did not im­ply any ban on nor­mal op­er­a­tions of banks with ex­ist­ing ac­count hold­ers.

Re­view­ing the progress and con­tri­bu­tion of the co­op­er­a­tive sec­tor, the Gover­nor also un­der­lined the need to "pro­fes­sion­alise" both the gov­er­nance struc­ture and func­tion­ing of these in­sti­tu­tions. "The co-op­er­a­tive sys­tem can be­come ef­fec­tive in­stru­men­tally for in­clu­sive growth and a pow­er­ful plat­form for en­fran­chis­ing the less priv­i­leged," he said.

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