Indian economic scene is throbbing with business activities encompassing all walks of life.Are our financial institutions able to keep pace? This question is being asked by business leaders across the spectrum.
Though RBI has constituted new licencing committee to grant licence to new Cooperative Banks but the process may take longer time than people can wait. Budget session may decide on some quicker route of granting licence to banks.
Meanwhile, RBI has said the new licences were required since vast segments of population, especially underprivileged, have still no access to banking services.
Currently, India has 27 public sector banks, seven new private sector banks, 15 old private sector banks, 31 foreign banks, 86 regional rural banks, four local area banks, 1,721urban cooperative banks, 31 state cooperative banks, and 371district central co-operative banks.
The last time private sector entities were granted licence to commence banking operations in India was YES Bank in 2004 and Kotak Mahindra Bank a year earlier in 2003.
The conditions being mulled over to put on industrial houses include a diversified and transparent shareholding structure, financial sector presence of minimum 10 years, their track record of dealing with public deposits and their existing retail customer base.
Besides, the industrial houses could also be asked to ring-fence their various operations to safeguard their banking operations from risks associated with other businesses.
Besides, RBI is also mulling granting only retail banking license or a small bank licence for first five years as part of a dual-licensing regime.
At the same time, RBI could also put strict penalties for violations of its various guidelines.