RBI may kickstart banking licence process in Jan: Sources

The BJP was vehement in its opposition of this Bill as long as it contained the forward contracts clause. The finance minister decided to drop the controversial clause in the larger interest of the passage of the Bill. CNBC-TV18's Siddharth Zarabi, quoting sources, throws light on the possible timeframe for the government and the Reserve Bank of India to start issuing new bank licences.

Also Read: Lok Sabha clears Banking Bill
Clearly, the mood has changed after the acrimonious debate on foreign direct investment (FDI) in retail. And within a matter of days, a sort of common ground has been reached between the principal Opposition and the Congress and on Monday morning it was very clear that the finance ministry had agreed to drop this clause to allow the Bill to proceed. Also Read: Banking Bill is positive; not keen on banking foray: Godrej
Remember, the current Bill was presented in the Lok Sabha on March 22, 2011 and after almost 18-19 months later it has finally been approved and a year after the standing committee submitted its recommendations. The key provisions of the Bill have further empowered the RBI to issue new bank licences. The amended Bill caps voting rights at 26 percent in phases through consultation with the Reserve Bank of India.
With the passage of this Bill it is clear that the finance ministry has done what it had promised- getting the Act approved through Parliament. The notification of course is a formality and will therefore allow the Reserve Bank of India to proceed with the process of deciding and invite applications for banking licences. Also Read: Bill will increase competition in banking biz: Kidwai
Sources indicate that the RBI could kickstart the licence process within the first month of the New Year. There is an increased likelihood that non-banking financial companies (NBFCs) will be given preference in the issuing of licneces, as they are already regulated to an extent and compliant with several broader financial sector and prudential norms and conditionalities.
The Bill now allows the finance minister to stand up in Parliament in his next Budget Speech and tell Parliament that the government had fulfilled its promise made in the earlier Budget Speech.