IDFC and
India Post are believed to be in the final lap of the race for a banking
licence.
The Bimal Jalan
panel, which is scrutinising the applications, submitted its recommendations to
the Reserve Bank of India here today on around 25 applications that included
L&T Finance, Religare, Reliance Capital, Shriram Capital, AV Birla Group,
LIC Housing Finance Ltd and Muthoot.
Top officials
said IDFC was likely to be among those selected for the coveted licence. India
Post could also get a licence if the cabinet agreed to allow it to convert
itself into a retail bank with a large rural network. These applicants were
also not asked to come up with explanations or additional documents to prove
their eligibility, the officials added.
The finance ministry, which is opposing India Post’s conversion into a bank, has not earmarked any funds for it in the budget. However, several other ministries, including the telecom ministry, maintain that it is the best way to fully utilise the huge postal network, which has long been doubling as a small savings bank and pay order service.
The finance ministry, which is opposing India Post’s conversion into a bank, has not earmarked any funds for it in the budget. However, several other ministries, including the telecom ministry, maintain that it is the best way to fully utilise the huge postal network, which has long been doubling as a small savings bank and pay order service.
Analysts also
believe that India Post, with its huge rural network, will be helpful in
rolling out the government’s Aadhar-linked subsidy payout schemes.
Initially, IDFC
was considered ineligible for the licence as the RBI demanded that banks should
have less than 50 per cent foreign holding.The development financier had
foreign ownership of nearly 54 per cent. However, last December, IDFC gave an
undertaking to reduce foreign institutional shareholding through a listing on
the Bombay Stock Exchange. “The board of directors on December 19, 2013 passed
a resolution approving postal ballot process for seeking an enabling resolution
from the shareholders to authorise the board to keep reducing ceiling limit of
the foreign shareholding from existing 54 per cent to 49.9 per cent in various
stages as and when the actual foreign shareholding goes down,” it stated.
Officials said
the grant of a licence was not tied to the announcement of the Lok Sabha
election and could be given out even if the code of conduct kicked in. The RBI
is expected to draw up a list of successful applicants and announce it by
March-end.
The RBI will look
into the background of each company that has been shortlisted by the Jalan
panel.
The government
had been locked in a tussle with the apex bank over eligibility criteria for the
licence.
The Reserve Bank
wanted to keep out large corporate houses and real estate bigwigs as their
business interests might clash with the prudential norms needed to run banks.
The finance
ministry was keen on the participation of corporate houses but favoured rules
that would set up a wall between the owners and the banking operations.
Officials said
the bid to prevent the business interests of companies from clashing with the
banking operations would act as a determining factor in the grant of a licence.
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