Bank licences should be given to those with innovative models, says FM

Mumbai: Finance Minister P Chidambaram today suggested the RBI prefer those applicants for new bank licence who want to set up specialised banks rather than the ones keen to establish clones of existing lenders.

“I sincerely hope that when the new banking licences are given in January 2014 some licences would at least go to the people who have come up with innovative and different model of banking addressed to meet the needs of special segments of the people,” he said in in his inaugural address at Bancon 2013 here.

[caption id=“attachment_1228287” align=“alignright” width=“380”]  The RBI logo. Reuters[/caption]

“It would be a pity if the new licences also goes to the bank which clone existing banks. I am confident that will not happen and innovative idea and innovative banking will gain recognition by the licencing authority,” it said.

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Emphasising that there is a need for different kinds of banks, he said: “We need banks which caters to communities, we need banks which cater to people living in what would call states where there is tribal population, we need a different bank to cater to the needs of North East…”

There is also need to promote banks which can cater to urban poor and farmer families, he added.

Noting that there is more cloning then differentiating, he said, “I am happy that Governor has spoken about differentiated banking licences.”

As many as 26 applications had been received for bank licences on the close on July 1, 2013.

Tata group, India’s biggest business group, and firms controlled by billionaires Anil Ambani and Kumar Mangalam Birla are among those which applied for bank licences.

Among public sector units, India Post and IFCI have submitted applications. Microfinance institutions such as Bandhan Financial Services and Janalakshmi Financial, too, have expressed their intention to set up banks.

The RBI had issued guidelines for Licensing of New Banks in the Private Sector on February 22 and came out with clarifications in the first week of June.

In the past 20 years, the RBI has issued licence to 12 banks in the private sector in two phases. Ten banks were licensed on the basis of guidelines issued in January 1993 and two in the second phase.

The guidelines were revised in January 2001 based on the experience gained from the functioning of these banks and fresh applications were invited. Kotak Mahindra Bank and Yes Bank were the last two entities to get banking licences from the RBI in 2003-04.

PTI