Raghuram Rajan said the central bank would take a decision in the next few weeks, subject to approval of the Election Commission.

To ensure there is no violation of the model code of conduct, the Reserve Bank (RBI) would approach the Election Commission for issuing new bank licences, Governor Raghuram Rajan announced here on Friday.

"If all goes well, we should be able to issue new licences in a few weeks," Mr. Rajan said.

The Governor was addressing a joint press conference with Union Finance Minister P Chidambaram following a meeting of the RBI Board here.

Mr. Chidambaram too had announced on Wednesday that the RBI was likely to issue new bank licences before the Lok Sabha polls. On Friday, he said that he made no recommendations to the RBI regarding the bank licences, however,

“We had appointed the Jalan Committee. The Jalan Committee report is before the RBI. …The RBI will take appropriate decisions,” he said. The Finance Minister said that if at some stage Mr Rajan wished to share the contents of the report with him, then he would listen but he didn’t intend to speak to the RBI about the recommendations of the Jalan Committee on bank licences.

The Finance Minister also said that it was agreed in the meeting with the Governor that the Government will set an inflation target, through Parliament, and then leave it to the monetary authority to find a way to achieve it. “The sovereign has the right to set the target and then the central bank has the mandate to take steps to achieve the target. I think that there is a great degree of convergence on the way to go forward,” Mr. Chidambaram said.

He also emphasised that India must achieve “price stability and growth, that is what the people of the country of want and that is what the people of the country deserve ” and added that by “working together” the Government and RBI would be able to achieve these targets.

An RBI panel had in January proposed moving to an inflation target of 4 percent in three years, with a 2 percent band on either side when setting monetary policy, sharply below current levels. Mr. Rajan has since said publicly that the government and parliament would have the final say in any decision on whether to adopt an inflation target.

Mr. Chidambaram also said that the Government was looking to issue shares to public sector banks employees but the decision on the proposal would be taken by the new government post elections. “We were looking at rights issue for minority shareholders. There was some discussion about non-voting shares but I think the time has come to look for new or innovative ways to raise more capital for the banks,” he said.

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