(Adds details, background)
By Shamik Paul and Neha Dasgupta
MUMBAI Feb 22 Indian companies from any
business sector will be allowed to seek entry to the country's
the banking industry as the government looks to bring banking
services to the large proportion of the population without bank
The country's central bank, the Reserve Bank of India (RBI)
on Friday announced rules that would allow any type of company
to apply for a banking licence, paving the way for India's first
new banks since the formation of Yes Bank in 2004.
Draft rules issued in 2011 had barred companies in the
property and brokerage industries from applying, and
disagreement between the central bank and finance ministry over
exclusions had slowed the release of the final rules.
Some critics, including the International Monetary Fund, had
also voiced concern over the possibility of new banks issuing
potentially risky loans to their related companies.
However, the final rules on Friday did not make any
The move to issue new bank licences is intended to increase
competition and bring fresh capital to an industry dominated by
state lenders and reaches only about half of Indian households.
Newly licenced banks will be required to open 25 percent of
their branches in rural areas that lack banking services.
"India has a huge population of unbanked ... and the real
concern is financial inclusion," said Rupa Rege Nitsure, chief
economist at Bank of Baroda.
APPLICANTS LINING UP
At least 10 companies, mostly from the financial services
sector, are expected to apply for licences. L&T Finance
, part of construction and infrastructure conglomerate
Larsen & Toubro Ltd, and billionaire Anil Ambani's
Reliance Capital are among those that have said they
are keen to apply.
The RBI will allow applications until July 1 and successful
applicants have a year to set up a bank. New banks must make a
stock market listing within three years - one year longer than
had been proposed in the draft rules.
The RBI said licences will be issued on a "very selective
basis" to applicants with "an impeccable track record".
The rules are intended to ring-fence a company's regulated
financial services operations from the rest of the group, the
RBI said on Friday.
"What is good is that the RBI has put in a lot of checks and
balances. The exposure norms they have defined have taken care
of all the risks that people would have been worried about,"
said Naresh Makhijani, executive director at KPMG.
Religare Enterprises Ltd, Aditya Birla Financial
Services and Mahindra Financial Services all said on
Friday that they plan to apply for licences.
(Additional reporting by Suvashree Dey Choudhury, Subhadip
Sircar, Nandita Bose and Archana Narayanan; Writing by Tony
Munroe; Editing by David Goodman)