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Proposed guidelines for issue of banking licenses soon

The Reserve Bank of India is expected to  bring out a second draft of the proposed guidelines for issuance of new banking licences by end of April, 2011.

After the Finance Minister’s announcement in 2010-11 Budget, the Reserve Bank had brought out a discussion paper in August 2010 on dispensing banking licences to business houses and non-banking finance companies, besides regulations for the same to foster greater competition.

The RBI also sought to know “whether industrial and business houses could be allowed to promote banks.” Further, it sought stakeholders’ views on whether NBFCs should be allowed to convert into or promote banks.

Various entities like Reliance Capital, IndiaBulls, Religare, IL&FS, IFCI and Aditya Birla Financial Services are reported to be mulling entering the banking space.

At present, India has 27 public sector banks, seven new private sector banks, 15 old private sector banks, 31 foreign banks, 86 regional rural banks, 4 local area banks, 1,721 urban cooperative banks, 31 state cooperative banks and 371 district central cooperative banks.

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