Opening new banks will not be a ‘cakewalk’: RBI’s Dy Guv

Mumbai: RBI Deputy Governor K C Chakrabarty on Tuesday said opening of new banks will not be easier this time around unlike in 1993-94 period, when a number of new lenders came up.

"This time opening of (new) banks is not so easy because we have got PSL (priority sector lending) norm which is mandatory and 25 per cent of the branches have to be opened in unbanked sectors," he said at an event here late evening.

"It will not be a cakewalk as it happened in 1993-94," he added.

The last time new banks were allowed was in 2002-03 when two licences were issued. In the first wave of privatisation of the banking sector, 10 players were allowed to start operations in the mid-1990s and these included ICICI Bank, HDFC Bank and IDBI Bank, among others.

Justifying the government's decision to grant new licences, the Deputy Governor emphasised on the need for more banks in the country to reach out to the unbanked population.

"We have less number of banks. Competition is less. That's why we are looking for issuing new licenses."

Chakrabarty pointed out that purpose of giving new banking licences is to further the cause of financial inclusion and aspirants with sound model will be given priority.

"That (financial inclusion) is what the objective is. But the issue is that these new licenses, if you see the guidelines exclusively says that it is for those people who want to further the objective of financial inclusion. Those (aspirants) who have a model, will be given the priority."

Referring to number of banking licences that will be issued, he declined to give any number.

Asked about the need of tailor-made banks which cater to specific requirements, the Deputy Governor said the regulator is looking at fit-all-size model as of now.

RBI released its final guidelines for new banking licensing in February this year, asking aspirants to submit applications by July 1, 2013.