No politics in granting new bank licences: Rajan

RBI Governor Raghuram Rajan has said the grant of new bank licences is a regulatory process and not a political one and hence should not be affected by the on-going election process. Photo: Meeta Ahlawat

Stating that the grant of new bank licences is a regulatory process and not political, RBI Governor Raghuram Rajan on Tuesday said the central bank had sought the Election Commission’s nod only to shield the announcement from any political controversy.

“This (giving bank licences) is not in any way a political process. It is an economic and regulatory process and therefore seen as distant and different...we have to undertake what we have to undertake,” he said in response to objections raised by the BJP with regard to awarding bank licences when the election process was underway.

“I think one should respect all the (political) opinions that are expressed,” he added.

The process to award new bank licences was initiated in 2011 and it has spilled over to the election season because the due diligence process took a little longer, Dr Rajan said, adding, “All regulatory processes have to come to an end.”

He said “this process has been taking place under its own steam. It is a regulatory process. It is not a governmental process and the notion of asking the EC was primarily because this is election season and we did not want the potential licensees to get their approvals under a cloud.”

The EC is yet to decide on RBI’s request to grant new licences during the election season. There are 25 applicants for new bank licences.

The model code of conduct came into force on March 5 with the announcement of the Lok Sabha election schedule. Voting will be held over nine days starting on April 7 and ending on May 12, with counting on May 16.

“Once they (EC) say there is no issue there, they (RBI) would be in a position to announce the bank licences very quickly after taking it to the committee of the central board,” Dr Rajan said.

On the issue of differentiated bank licences as well as on-tap licences, he said, “The point is we should not be giving licences every 10 years and I also think that there is scope for having people with partial licences, for example, only for payments, lending, to come into the system.”