New banking licences may turn out to be a dampener for hopefuls such as Reliance Capital, Cholamandalam and Tata Finance, as RBI, in consultation with the government, is planning to restrict fresh entrants to rural and semi-urban areas in the initial years.
A finance ministry official told ET "“New entrants may only be allowed to open branches in rural areas for the first two years and the subsequent spread will depend on the basis of their direct lending to the agriculture sector, opening of no-frill accounts, and other financial inclusion criteria”.
As per the budget announcement, both the government and RBI will work together to provide appropriate banking facilities to areas having population in excess of 2,000 by March 2012.
RBI feels the thrust towards financial inclusion from the private sector has been very low. As per RBI data, while the 27 public sector banks have opened 13,381 branches so far in rural areas, the 22 private sector banks, both old and new, are far behind with 1,113 branches.
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