Reserve Bank of India

RBI to issue discussion paper on Banking License conditions this week.

The Reserve Bank of India plans to consider issuing banking licences to private sector players and non-bank finance (NBFC) companies to promote new banks, it said in a press release to the media.The RBI is expected to selectively permit some large business houses with diversified sources of income and a stable track record to convert into a Bank, an industry executive said.

According to the discussion paper to be released this week, aspiring banks seeking a licence may be asked to form compulsary alliances with regional rural banks (RRBs) to help them begin operations on a wider footprint, as also to hasten financial inclusion in the nation.

Reserve Bank of India Microfinance bill

Reserve Bank of India

The Reserve Bank of India (RBI) is expected to set stringent conditions that new banks must open a certain minimum number of branches in unbanked areas, according to an RBI official.The central bank is scheduled to finalise the draft guidelines for new bank licences this month and some bankers expect these to be announced with the quarterly monetary policy review on tuesday the 27th of July 2010.

An internal committee of the Reserve Bank of India has been working on the new banking license guidelines for some months now. The minimum required capital is expected to be set at Rs 500 crore initially, with a provision that it be raised to Rs 1,000 crore within 3 years of issue of the license.There is a growing capital requirement if the economy has to grow faster than the 8.5 per cent it is expected to grow by March 2011. Foreigners are expected to be permitted to invest up to a maximum of 20 per cent, the sources revealed.

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