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MUMBAI, Jan. 30

THE Reserve Bank of India has granted in-principle approval to Kotak Mahindra Finance Ltd and Rabobank for their proposals to set up banks.

In the case of Kotak Mahindra, the RBI has stipulated that the NBFC has to convert itself into a bank (instead of setting up a new bank) and continue simultaneously as a non-banking finance company. Rabobank has applied for banking licence jointly with three individuals - two banking professionals - Mr Rana Kapur and Mr Harkirat Singh - and one Mr Ashok Kapur.

The approval follows the recommendations of a high-level committee chaired by Dr I.G. Patel, former RBI Governor, that both the applicants were suitable for setting up new banks, according to an RBI release.

The in-principle approvals will be valid for one year during which the applicants can mobilise the required capital and fulfil other conditions outlined in the RBI guidelines for licensing of new banks in the private sector.

On being satisfied that the applicants have complied with the requisite conditions laid down by the RBI as part of the in-principle approval, they would be considered in due course, for grant of a licence for commencement of banking business under Section 22 (1) of Banking Regulation Act, 1949, the release said.

The Reserve Bank will consider inviting fresh applications for new banks in the private sector after three years from now after further reviewing the working of the private sector banks. The guidelines issued in 2001 may also be revised if considered necessary, the release added.

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