Those who were left out can apply for new bank licence: Rajan

Reserve Bank governor Raghuram Rajan on Friday defended handing out just two licences out of the 25 banking applicants saying the selection panel felt that some of them were better placed to serve as differentiated banks.  

Rajan said when asked about the very conservative approach to the much-touted licensing process, “We went through the list of applicants and this was the set of applicants that the Jalan committee as well as the Reserve Bank were comfortable with.  

We have opened up the possibility that those left out applicants can apply again once we put the licences on-tap as well as we create differentiated licences.

Some of the applicants may be better off applying for a differentiated licence rather than for the full licence,.

Rajan was talking to reporters on the sidelines of the annual convocation of the RBI-run National Institute of Bank Management in Pune.

Ending a process that began three years ago, the RBI handed out just two licences on April 2 — to infra lender IDFC and Kolkata-based micro-lender Bandhan.

This left out notable biggies like Reliance Anil Ambani Group, the Birlas, Bajaj Group among 22 others, after the Election Commission gave the go-ahead a day earlier.

The RBI agreed to consider the application of India Post in consultation with the government and advised other applicants to apply afresh after the central bank comes out with new guidelines on granting licences ‘on tap’.

The apex bank in a statement said, “The in-principle approval granted (to two entities) will be valid for a period of 18 months during which the applicants have to comply with the requirements under the guidelines and fulfil the other conditions as may be stipulated by the RBI.”  

The RBI originally received 27 applications in July 2013, but Tata Sons and Videocon Group withdrew from the race, leaving 25 contenders.  

The entities that did not succeed in getting bank licences include Aditya Birla Nuvo, Bajaj Finserv, Reliance Capital, LIC Housing Finance, L&T Finance, Indiabulls Housing Finance, Edelweiss, IFCI, India Infoline, J M Financial, Muthoot Finance, Religare, Shriram Capital and Srei Infrastructure.  

At present, there are 27 public sector banks, 22 private sector banks and close to 50 foreign banks in the country. The RBI has issued bank licences after a gap of 12 years. It last awarded permits to Kotak Mahindra Bank and Yes Bank in 2003-04.  

The RBI said IDFC and Bandhan were recommended as suitable for grant of “in-principle” approval by the high-level advisory committee headed by former Governor Bimal Jalan.  

The committee had recommended that in the case of Department of Posts, which had applied for a licence, “it would be desirable for the RBI to consider the application separately in consultation with the government”.