With 26 public and private sector companies applying for bank licences, Finance Minister P Chidambaram has said that there was no ceiling on the number of entities which can be permitted to operate a bank.
“I don’t think there is a ceiling. I don’t think there is a number in mind. It all depends upon how many applicants are eligible applicants. The fact that somebody applies doesn’t mean he is an eligible applicant,” he said in an interview.
“If there are very few eligible applicants, then the number of banks that will get licences will also be few. I don’t think that the Governor has any ceiling in mind,” he said.
On whether India needs large banks or large number of banks, the Finance Minister said there is a case for both.
“A large number of banks will mean more competition, a quicker reaching into the country and faster financial inclusion. Large banks will mean that we are able to finance large projects using our own bank resources rather than depending upon foreign bank resources. So, both are required in this country,” he said.
Yesterday, RBI announced that 26 entities, including Tata Sons, LIC Housing Finance, Aditya Birla Nuvo, Department of Posts, Reliance Capital, L&T Finance and Bajaj Finserv, applied for grant of bank licences.
RBI Governor D Subbarao had earlier said that “our effort will be to make that judgement as transparent as objective as contestable as possible...I want to say that not everybody who is fit and proper will be given a (bank) licence because we expect the number of eligible applicants will be much larger than what is meaningful number of licences we can give”.
In its clarification, the RBI had said the entities getting licences to open new banks will be given 18 months to open branches, and promoters would have to transfer their holdings to the non-operative financial holding company (NOFHC) in a stipulated period.
The NOFHC envisages holding of the bank and other regulated financial services entities of the promoters under the NOFHC and prudential exposure norms for the entities.
The Reserve Bank is expected to grant new licences by March next year.
India has 26 public sector banks, 22 private sector banks and 56 regional rural banks.
