Govt to send comments on new bank licences to RBI soon, says FM

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Finance Minister P Chidambaram
Finance Minister P Chidambaram

The government will soon send its comments to the Reserve Bank of India (RBI) on issuing new bank licences, the Finance Minister P Chidambaram said today.

“We are sending our comment on banking licence to RBI,” he said here.

The RBI is preparing final guidelines for issuance of new bank licences after Parliament approved Banking Laws (Amendment) Bill last month.

The Bill, now approved, aims at strengthening banking regulation. It allows RBI to supersede boards of private banks and increase the cap on voting rights of private investors in public sector banks to 10 per cent, from 1 per cent now.

As per the draft guidelines on new bank licences, business houses with successful track record and a minimum capital of Rs 500 crore will be allowed to set up commercial banks. Currently, the minimum capital requirement for opening a bank is Rs 300 crore.

The draft guidelines said companies which are primarily engaged in the real estate business or stock broking will not be eligible for promoting bank.

“Entities or groups having significant (10 per cent or more) income or assets or both from real estate, construction and broking activities individually or taken together in the last three years will not be eligible to set up new banks,” the draft said.

On foreign holding, it said the aggregate non-resident shareholding in the new bank should not exceed 49 per cent for the first five years.

At present, the foreign shareholding in private sector banks is allowed up to 74 per cent of the paid-up capital.

Over the last two decades, the RBI licensed 12 banks in the private sector in two phases — 10 in 1993 and two later.

There are 26 public sector banks, seven new private sector banks, 15 old private sector banks.

(This article was published on January 4, 2013)
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