P. Chidambaram with Raghuram Rajan in New Delhi on Friday. Picture by Prem Singh
New Delhi, March 7: The Reserve Bank of India plans to issue new bank licences over the next few weeks after getting the approval of the Election Commission.
The decision to move the Election Commission is more of a precautionary measure as the poll panel had earlier indicated that it did not consider the grant of bank licences as violating the model code of conduct now in force ahead of the general elections.
“My sense is, if all goes well we should be able to do it in a few weeks. Look, we have to (seek) the formal approval from the EC that announcing the bank licences will be okay. A number of people have said it will, but it would be best that the process is formally approved by the EC,” RBI governor Raghuram Rajan told reporters after a board meeting attended by finance minister P. Chidambaram here today.
Rajan said the issue of licence would not be a violation of the model code of conduct as the process was initiated in February 2013 and was not a new proposal. However, a formal reference will still be made as a “mark of abundant caution”, officials said.
The RBI governor said the apex bank was studying the recommendations of the Bimal Jalan Committee on the applications. “Once we (complete) due diligence, we will pass the report to the committee of the board. After that, the decision on bank licences will be taken,” he added.
IDFC and India Post are believed to be the top contenders for a licence. The Bimal Jalan-panel had submitted its recommendations to the RBI on around 25 applications, which included L&T Finance, Religare, Reliance capital, Shriram Capital, AV Birla Group, LIC Housing and Muthoot.
However, India Post cannot compete for a bank licence unless the government allows it to transform itself into a bank. Till now, the finance ministry has been reluctant to give its approval.
Finance minister P. Chidambaram, however, said he had made no recommendations to the RBI. “The Jalan committee report is before the RBI. I have not seen the report. The RBI will take appropriate decisions. If at some stage the governor wishes to share its content with me, then I would be very happy to listen. But I don’t intend to speak,” he said.
The guidelines for setting up new banks were issued in February 2013 and the last day for the submission of applications was July 1.
The RBI had received 27 applications, but subsequently Tata Sons and Value Industries withdrew their applications.