The Telegraph
Monday , March 24 , 2014

New bank norm check

- Poll panel delves into matters of probity before giving a go-ahead to implement decisions

New Delhi, March 23: The Reserve Bank’s bid to grant banking licences may not be stalled by the Election Commission (EC) though the latter may seek some clarifications.

The commission does not want to stall the normal functioning of the government or autonomous bodies such as the RBI. However, officials said the electoral watchdog, which wants to ensure that no policy decision is taken to influence voters, had raised questions about why the RBI wanted to announce the licences in March when it had started the process much earlier.

Officials said Election Commissioner H.S. Brahma had made it clear that he would not interfere in routine policies. He specifically mentioned the allotment of banking licences as the decision was taken long back.

The EC has not sent any letter to the Reserve Bank yet but would seek clarifications before approving the move.

North Block officials said the finance ministry would not approach the commission with any recommendations as it “was a matter between the RBI and the EC”.

The RBI, however, is believed to be not pleased with the way the finance ministry handled the issue of licences, especially the manner in which it tried to speed up the process, dilute the conditions on avoiding conflicts of interest and attempted to place hurdled before India Post.

The Bimal Jalan panel examining the applications submitted its recommendations to the RBI on February 25.

The RBI has received around 25 applications, including L&T Finance, Religare, Reliance Capital, Shriram Capital, AV Birla Group, LIC Housing and Muthoot.

Top officials have speculated that IDFC and LIC Housing are likely to get licences, despite initial reservations about IDFC.

The finance ministry is not in favour of allowing India Post to become a bank and has not earmarked any funds in the interim budget.

However, several other ministries, including telecom, which runs the postal service, feel a bank is the best way to leverage the huge postal network. In any case, post offices do double up as “banks” in the manner in which they handle small savings and money orders.

Besides, analysts believe the huge rural reach of India Post will enable the government roll out its Aadhar-linked subsidy payout scheme.

The main conflict between North Block and the RBI has been over the kind of entities that should be eligible for licences.

The Reserve Bank has been firm about keeping out large corporate houses and real estate giants as their business interests may clash with the prudential norms needed to run banks.

The finance ministry does not want corporate houses to be kept out and instead wants barriers between the owners and banking operations.


New bank licences

  • RBI set to announce new bank licences soon after getting approval from Election Commission as the model code of conduct is in force
  • Poll panel unlikely to stall issue of new licences as process started last year
  • One area of concern is why RBI wants to announce the licences so late when the process had begun long back
  • Commission to seek clarifications from RBI before giving its approval
  • EC has to ensure that ruling party doesn’t get any advantage in the elections from the move

Gas price hike

  • Election Commission yet to respond to cabinet’s request that it be allowed to implement hike in gas price
  • Gas prices seen to double from $4.2 per mBtu from April
  • Supreme Court is hearing petitions filed against the hike
  • Commission unlikely to take a call till the apex court gives its verdict