Jalan panel to RBI: Keep tainted entities away from banking licence race

New bank licence applicants being probed by investigative agencies might not be given licences, if the Reserve Bank of India (RBI) goes by the Bimal Jalan committee’s recommendations. 

After the advisory committee headed by the former RBI governor, screened the 25 applications, it gave a report on the matter on Tuesday. 

According to sources privy to the development, the committee has strictly followed RBI’s new bank licence norms, which had clearly defined the “fit and proper” criteria. The final norms in this regard, released by RBI in February 2013, had emphasised a clean track record of 10 years. 

It had defined “fit and proper” criteria as “entities/groups should have a past record of sound credentials and integrity and be financially sound, with a successful track record of 10 years. 

For this purpose, RBI may seek feedback from other regulators and enforcement & investigative agencies”. 

If the recommendations of the Jalan panel are followed by the central bank, companies whose names figure in the 2G telecom spectrum scam and the coal block allocation scam, or those involved in other investigations will not get licences. 

The banking regulator is expected to issue new bank licences by the end of March this year. 

RBI had constituted the Jalan committee to examine the fit and proper criteria, business plans, corporate governance practices, etc, of new bank licence applicants. 

Other members of the committee are former RBI deputy governor Usha Thorat, former Securities and Exchange Board of India chairman C B Bhave and Nachiket M Mor, director of RBI’s central board. 

On September 4, the day Raghuram Rajan had taken charge as RBI governor, he had announced the process to award new bank licences would be finalised in January, around the time Anand Sinha retired as deputy governor of RBI. Sinha was looking after the process to award new bank licences.

However, as the scope of the work increased considerably, it was planned the licences would be awarded by March-end. Delay in receiving information from investigative agencies also slowed the process.