Mumbai, Oct. 26: The RBI-appointed review committee on Local Area Banks (LABs) has recommended that no new licences should be given till the existing ones are placed on a sound footing.
The committee, headed by former finance secretary G. Ramachandran, said since some LABs have just started functioning more time was needed to observe their performance.
Suggesting that labs should be treated on par with co-operative banks in the matter of opening of branches, the panel felt that other restrictions should be waived and the opening of the branch should be subject only to the granting of a licence by the Reserve Bank of India.
LABs need to be treated like any other commercial bank and hence regulation and supervision should be entrusted to the same wing of the RBI, which is responsible for commercial banks, the apex body said.
To make a LAB viable, the panel felt they should have a net worth of Rs 25 crore and capital adequacy norm of 15 per cent to build an asset base of about Rs 150 crore at which their operations would become viable.