Need to tweak rules for bank licences to corporates: RBI

The RBI governor Subbarao today hinted the new bank licence rules may allow corporates to promote banks. Speaking at the FICCI-IBA banking conference he said that as the country contemplates allowing corporate groups to promote banks, there is a need to strengthen rules that prevent banks from lending to interested or promoter groups and directors.

The draft new rules are expected to be issued by the RBI end of this week or early next week. India needs to make changes to statutes and regulations to address concerns over ownership while granting bank licences to corporates, the Reserve Bank chief will say in a speech on Tuesday. "As we contemplate allowing corporates to promote banks, there is need for changes in statutes and regulations to address these concerns," Reserve Bank of India Governor Duvvuri Subbarao will say in a speech, an advance copy of which was provided to the media, at a banking conference. Subbarao will say there are "persuasive" arguments both for and against giving bank licences to corporates. The RBI is expected to shortly release its draft guidelines on new private bank licences, a move which is being closely watched by many Indian corporates which are eager to enter the banking sector. The governor will also say the central bank is close to finalising the rules for compensation of chief executives and other top bank officials, the speech copy showed. (With inputs from Reuters) Also watch the accompanying video for the full press conference.