Jalan committee on new bank licences to meet on Feb 10, 2014

The Bimal Jalan panel which is scrutinizing applications for new bank licences will hold a meeting on February 10, 2014.

Which are the entities in the race for bank licences?

Initially, 26 entities expressed interest in entering the banking field. But, Tata Sons, the holding company of the Tata group, withdrew its application in November 2013 leaving 25 players.

• Public sector units:  India Post and IFCI, Private sector: Anil Ambani group, Aditya Birla, Bajaj Finance, Muthoot Finance, Religare Enterprises, etc have applied for the licences.
• The last two entities to get banking licences from RBI in 2003-04 :Kotak Mahindra Bank and Yes Bank. 

At present, India has 27 public sector banks, 22 private sector banks and 56 regional rural banks.

RBI’s Guidelines for New Bank Licenses:

The RBI issued guidelines for licensing of new banks on February 22, 2013 and issued clarifications in June 2013.

• The business model of the applicant would be an important criterion for processing the application and the model should provide for financial inclusion.
• Bank should have 49% caps on foreign holding in new banks.
• New banks are required to establish at least 25% of their branches in places with less than 10,000 populations.
• Existing NBFCs, if considered eligible, may be permitted to promote new banks or convert themselves into banks.
• Private corporate and public sector entities must have 10 years experience to be eligible to apply for new license. The initial paid-up capital for new banks has been set at Rs 500 crore. 

Note: Mr. Bimal Jalan, former Reserve Bank of India (RBI) governor, heads the panel on new bank licenses.