The Reserve Bank of India (RBI) expects to hand out new bank licences in a few weeks from now, its Governor Raghuram Rajan has said.

As many as 25 applicants are in the fray for new banking licences, which are now being awarded after a span of a decade.

Playing it safe, the central bank will formally seek Election Commission’s approval for awarding new bank licences, given that the model code of electoral conduct has come into effect.

While many have held the view that awarding banking licences will not be violative of the model code of electoral conduct, Rajan said it would be best that this process is approved by the Election Commission.

"We will ask the Election Commission.. to make sure …as it (banking licences) is an important issue.

“I think the process has taken place over last one year and it is nothing new. But certainly we would want them (Election Commission) to be ok with it", Rajan said at a joint press conference with the Finance Minister P Chidambaram after the latter’s customary post-budget meeting with the directors of the RBI Central Board here on Friday.

Chidambaram addressed the RBI Board to discuss various aspects of the interim budget including the 10 point agenda set out at the end of the budget speech.


Asked if he had referred to the banking licences in his discussions with the RBI Board today, Chidambaram replied in the negative.

"I have not seen the Jalan committee report. I have no recommendations for RBI. RBI will take appropriate decisions. At some stage if Governor wishes to share his thinking with me, I will be very happy to listen. But I don’t intend to speak", Chidambaram said.

Chidambaram was responding to a query on whether he had recommendations to RBI on the matter of debarring those applicants who had investigations pending against them.

"I have no recommendations. The Jalan committee was appointed. The document inviting applications set out the parameters. The Jalan committee had factored these parameters and made appropriate recommendations and I am sure RBI will take appropriate decisions", he said.


Outlining the process that would be adopted by RBI for finalising the banking licence awardees, Rajan said a committee of Governor and the Deputy Governor was looking at the applicants in the light of Jalan Committee report.

"Once we have done the due diligence we will pass on recommendations to the committee of the central board. After that the committee of the Central Board will take final decision", Rajan said.

(This article was published on March 7, 2014)
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