MPs want auction of bank licences

MPs want auction of bank licences

Mumbai: Reserve Bank of India (RBI) governor D Subbarao on Monday met the Parliamentary standing committee on finance to discuss the issuance of new banking licences to companies, a person familiar with the development said.

According to the person, the members of Parliament suggested auctions of new banking licences to the aspirants, citing the controversies in the allocation of second generation airwaves or 2G.

Mint could not immediately reach any member of the standing committee. A senior banker said, banking licences cannot be auctioned as unlike telecom, banks play a different role and deal with public money.

In August, RBI had released its draft licensing norms for a new set of private banks and said firms that have 10% or more exposure to real estate and brokerage businesses in terms of income or assets, will not eligible to set up a bank.

Also, a corporation or an NBFC will need a "diversified ownership, sound credentials and integrity", and a 10-year track record, the RBI said.

Releasing the draft, the RBI had said it will give licence on a "very selective basis" and "it may not be possible for RBI to issue licences to all the applicants meeting the eligibility criteria".