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RBI plans ‘on tap’ bank licensing

The Reserve Bank of India (RBI) plans to offer banking licences ‘on tap’ after it revises and issues guidelines on setting up banks in the country. The banking regulator has been issuing licences in a bunch at periodic intervals. “We are working on the guidelines on new bank licensing. The new guidelines on types of banks, universal, differentiated, etc, will be issued shortly. After these are issued, we intend to offer licences on tap,” RBI’s deputy governor R Gandhi told reporters on the sidelines of a banking seminar organised by the Indian Chamber of Commerce here on Saturday.

RBI has recently granted in-principle approval for banking licence to two new players – Bandhan and IDFC. However, the decision surprised many as new banking licences were being offered to promote financial inclusion and there were as many as 25 applicants including large corporate houses such as Anil Ambani’s Reliance Group, Kumar Mangalam Birla-led Aditya Birla Group and the Bajaj Group.

The central bank, however, has kept the door open for corporate houses saying that it intends to use the learning from this round’s licensing exercise to revise the existing guidelines appropriately. The banking regulator had also indicated that it plans to frame guidelines for different types of banks, building on its prior discussion paper.

Gandhi said RBI will also frame guidelines for differentiated banks, which may include payments bank, retail bank and investment bank.

Separately, on subsidiarisation of foreign banks, Gandhi said RBI will allow more time to foreign lenders before asking them to mandatorily convert their India branches into subsidiaries. “It is a new proposition. Let us wait for some more time,” he said without detailing further.

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