Getting a banking license will not be easy for corporate, industrial groups

Mumbai, Ta. 21 November 2020, Saturday

An internal working committee of the Reserve Bank, which is reviewing the corporate structure of private banks, has recommended in a report a drastic change in the ownership norms of banks. The committee has suggested amending the Banking Regulation Act 13 to allow large corporate and industrial groups to run banks, but looking at the committee's recommendations, it seems that it will not be easy for corporates or NBFCs to get licenses.

A report issued by the committee also recommended that large non-banking financial companies (NBFCs) with an asset size of Rs 20,000 crore or more with a good track record be allowed to convert into banks.

Many financial institutions have also been enthusiastic about these recommendations. Industrial houses can apply for a license directly or those who engage in lending activity can convert their current business directly into a bank, the report said. However, it remains to be seen how many companies will be able to get licenses, keeping in view the Reserve Bank's conditions, an analyst said. It is also important that the administrative standards of the companies seeking licenses remain the best.

He also opined that the Reserve Bank would not adopt a lenient policy in issuing licenses in view of the recent failures of many banks in the country. It is also a fact that the license policy is in force at the moment but no one gets a license from the Reserve Bank.

Suggestions on the recommendations of the committee have been invited till January 15. If these recommendations are accepted, India's banking industry will see a re-entry into the corporate world after a period of 40 years, i.e. 150 years.

In 190, the final phase of nationalization of the country's banks was completed. Many industrial groups have been keen to venture into the banking sector since the 19th, when private players were allowed to run banks, but no progress has been made.