More players to get bank licences: Finance Ministry

Finance Ministry has stated that the Reserve Bank of India (RBI) will come out with fresh guidelines on new bank licences in the next four months. During April, the RBI has issued bank licences to only two companies IDFC and Bandhan Financial Services. Financial Services Secretary G. S. Sandhu said that the central bank will take four months to draft new guidelines for issuing banking licences to more players. Currently, there are 25 public and private sector applicants for new banking licence including NBFCs and various large corporates such as India Post, IFCI and large business houses such as the Anil Ambani group and the Aditya Birla group. The move will help to enhance the penetration level of the Indian banking industry which in turn will provide impetus to economic growth through providing more credit to small and medium size enterprises. At present, there are 27 public sector banks and 22 private sector lenders in India. According to the RBI’s final guidelines for new set of proposed banks, banks should have a minimum equity capital of around Rs 5 billion and not have foreign ownership of more than 49% for the first five years of operation. The norms also require that one out of every four branches opened by the new banks should be located in rural areas.