Corporates interested in setting up new banks start groundwork
The Lok Sabha passed the Banking Laws (Amendment) Bill, 2011, paving the way for foreign investments in the sector and establishment of new private banks.
New Delhi: Corporate entities interested in setting up new banks, including Reliance and Religare, have begun doing the groundwork after a key Bill was passed in the Lok Sabha on Tuesday evening. In a major step to reform India's banking sector, the Lok Sabha had passed the Banking Laws (Amendment) Bill, 2011, paving the way for foreign investments in the sector and establishment of new private banks.
The Bill will allows RBI to supersede boards of private sector banks and increase the cap on voting rights of private investors in PSBs to 10 per cent from 1 per cent. RBI wanted the government to amend the banking laws before starting the process towards issuance of new banking licences. The major groups interested in seeking new banking licenses, whenever RBI decides to give them, include Anil Ambani-led Reliance Group, financial services conglomerate Religare group, Larsen & Toubro and Shriram group.
Welcoming the passage of the bill in Lok Sabha, Religare Enterprises chief Shachindra Nath said that "it is important that new banks are brought in to contribute towards the overall financial inclusion and development agenda". "We are now waiting for the Bill to be passed in the Upper House and the RBI to come out with its final guidelines post which we would evaluate how we align our banking business model with the regulatory intent," Nath said.
"Given the under penetration of banking and financial services in a country as large as India, it is important that new banks are brought in to contribute towards the overall financial inclusion and development agenda," he said. "Having said that, this will also pave way for more reforms and investments in the sector," Nath added.
When contacted, a spokesperson for Reliance Capital, the financial services arm of Reliance group, also welcomed the passage of the bill in Lok Sabha, but did not comment further. Reliance Capital CEO Sam Ghosh has earlier said that the group is full-prepared from its side for banking foray. "We are ready. We have been working on this for quite some time... for about one and half years," Ghosh had said.
While the process of granting new banking licences have been underway for quite some time, the government has recently indicated that a framework could be put in place soon for allowing new players in this business. The RBI had issued draft guidelines in August 2011 for issuance of new banking licences, while in July 2012 it released the comments and suggestions received by it.
Religare group and Reliance Capital have shown their interest in starting new banks ever since a proposal was floated to issue new licenses. Addressing Reliance Capital shareholders last year, Chairman Anil Ambani had said that the group's banking entity could be called 'Reliance Bank'.