New bank licences: EC to decide on RBI’s move on 31 March

Election commissioner Brahma says RBI has submitted clarifications sought by commission

RBI is in process of issuing new bank licences to a third set of private banks. Photo: Bloomberg
RBI is in process of issuing new bank licences to a third set of private banks. Photo: Bloomberg

New Delhi: The Election Commission (EC) will decide on the Reserve Bank of India’s (RBI) proposal to grant new bank licences on Monday, election commissioner H.S. Brahma said on Wednesday.

“We will take a final call on bank licences on Monday. We have sought clarification from RBI on why they approached us. RBI has already sent a clarification,” Brahma said on the sidelines of a Confederation of Indian Industry event.

The Model Code of Conduct for political parties, which came into force with the declaration of poll dates on 5 March, restricts the government from making announcements that can influence voters. Elections to the 16th Lok Sabha are to be held in nine phases running from 7 April to 12 May.

The banking regulator is currently in the process of issuing licences to a third set of private banks in Asia’s third largest economy, where more than half the adult population does not have access to formal financial services.

Soon after the Model Code of Conduct came into force, RBI sent its proposal to grant banking licences for two entities to the EC maintaining that the government had already announced giving new bank licences before the EC’s notification.

“Decisions on who should get bank licence is an internal RBI decision,” Brahma said.

A total of 25 companies have applied for licences, and RBI governor Raghuram Rajansaid earlier this month that he wanted the EC’s approval ahead of the general election.

Bank licence applicants include Reliance Capital Ltd, Bajaj Finserv Ltd, Aditya BirlaFinancial Services Group, L&T Finance Holdings Ltdand India Post.

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