RBI likely to release new bank license paper on Aug 11

Here is a verbatim transcript of her comments. Also watch the accompanying video. 

The disappointment came when the RBI Governor said that the credit policy speech that it would be either in July or very early in August so every day of August has been a wait. Possibly our wait is going to end on Wednesday evening, a good 90% chance.

Now just some suggestions about what it could contain. The RBI who are very guarded in what they want to say indicate that practically everything that you, what discussed in bank licenses will be discussed in the discussion paper with pros and cons.

We may or may not state the RBI’s current preference, that’s about maximum that they are going to say, typical central bank evasion in terms of revealing the details. The expectation is that definitely the promoters cap which is now at 10% has to be brought down to 10% could be kept at 26%. That definitely is a suggestion that could be made with pros and cons discussed,

The other suggestion which seems to be doing the rounds and I won’t say that is strictly emanating from the RBI itself whether entities will be allowed to come into, people who are given the licenses are told to takeover an Regional Rural Bank (RRB).

Given the clientele of that bank very nearly their focus will be rural. So the other thing that is expected is that the discussion paper will look for ways and means to ensure that the new licensees concentrate on financial inclusion and on rural banking and don’t o to the over crowded over banked urban centers.

But the biggest point that the entire nation will be watching out for is what do they do with corporate houses? There are calculations which everybody will give you that this country needs Rs 500,000 crore of capital, Rs 200,000 crore of capital. Rs 100,000 crore comes from here, there but then we are short of Rs 200,000 crore. They will give you all these calculations to prove that only corporate houses allowed into banking can bring that kind of capital but this has been anathema to the Reserve Bank.

There are zillions of examples of very developed markets like the US which don’t allow corporate houses into banking. So that will be the central discussion point. It will be raised. It cannot be raised but which way the RBI will tilt if at all would be the million dollar question.