Limited Licenses to new banks in private sector

Recently, RBI released a discussion paper on Entry of new banks in the Private sector. This discussion paper is mainly aimed at inviting the feedback and suggestions from the stakeholders, RBI would set up comprehensive guidelines for licensing of new banks.

On the following aspects in the Discussion paper RBI invites suggestions:

Minimum capital requirements for new banks and promoters contribution

Minimum and maximum caps on promoter shareholding and other shareholders

Foreign shareholding in the new banks

Whether industrial and business houses could be allowed to promote banks

Should Non-Banking Financial Companies be allowed conversion into banks or to promote a bank

Business model for the new banks (source. RBI website)

Why this step???

According to the discussion paper, RBI is considering this approach as larger number of banks would foster competition, reduce costs and improve the quality of service. It would promote financial inclusion and ultimately support inclusive economic growth, which is a key focus public policy.

For the discussion paper go to the link:

http://rbidocs.rbi.org.in/rdocs/content/PDFs/FIDIS110810.pdf