Will look into new bank licences after RBI scrutiny: Jalan

The proposed external committee will look into new bank licence applications once RBI completes the basic scrutiny, said Bimal Jalan who heads the High Level Advisory Committee (HLAC).

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"Work is still in progress. The Reserve Bank has received applications. It is doing first round of scrutiny. Then we will see how we go about it," Jalan said at AIMA event here today. Soon after Raghuram Rajan took charge as the 23rd Governor of RBI, he had said that an external committee would be headed by former central bank Governor Bimal Jalan to screen the 26 applications for bank licences.

"We are in the process of constituting an external committee. Bimal Jalan, an illustrious former Governor, has agreed to chair it and the committee will be composed of individuals with impeccable reputation," Rajan had said. The external committee will make recommendations to the Governor and Deputy Governors, who will propose the final slate to the Committee of the RBI central board.

Tata Sons, India's biggest business group, and firms controlled by billionaires Anil Ambani and Kumar Mangalam Birla are among the 26 entities that applied for bank licences last month. Among public sector units, India Post and IFCI have submitted applications. Micro finance institutions such as Bandhan Financial Services and Janalakshmi Financial, too, have expressed their intention to set up banks.

The RBI had issued guidelines for Licensing of New Banks in the Private Sector on February 22 and came out with clarifications in the first week of June. In the past 20 years, the RBI has licensed 12 banks in the private sector in two phases. Ten banks were licensed on the basis of guidelines issued in January 1993.

The guidelines were revised in January 2001 based on the experience gained from the functioning of these banks and fresh applications were invited. Kotak Mahindra Bank and Yes Bank were the last two entities to get banking licenses from the RBI in 2003-04.

In the 2001 round of guidelines for new licences, the external committee members were CG Somiah, former government auditor CAG, IG Patel, former RBI Governor, and Dipankar Basu, former head of State Bank of India.