Would-be banks seeking a licence may be asked to form alliances with regional rural banks (RRBs) to help them begin operations on a wider footprint, as also to hasten financial inclusion.
Reserve Bank of India (RBI) is likely to set a condition that new banks open a certain minimum number of branches in unbanked areas, according to an official. The central bank is scheduled to finalise draft guidelines for new bank licences this month and some bankers expect these to be announced with the quarterly monetary policy review on Tuesday.
RBI plans to consider granting licences to private sector players and non-bank finance companies to promote new banks. It may selectively permit some large business houses with diversified sources of income and a stable track record.
The central bank may not be enthused to let in securities’ firms because of the volatility in their earnings and market capitalisation. The confidence of depositors could get shaken if income and profits of these firms get eroded, as was witnessed during the global economic downturn in 2008 and early-2009.
An internal committee of RBI is working on the guidelines. The minimum required capital may be set at Rs 500 crore initially, with a provision that it be raised to Rs 1,000 crore by the third year. There is a growing capital requirement if the economy has to grow faster than the 8.5 per cent it aims for the year to March 2011. Foreigners may be permitted to invest up to 20 per cent, the sources said.
“Banks in India will need about $25 billion over the next five years to meet credit, financial inclusion and Basel-2 requirements,’’ said Ashvin Parekh, partner and national leader, global financial services, Ernst & Young.
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