State-run IDFC Limited, India’s leading integrated infrastructure finance player and Kolkata-based microfinance firm Bandhan Financial Services were on Wednesday granted banking licence by the Reserve Bank of India (RBI).
The clearance came a day after the Election Commission granted RBI the permission to go ahead with the issue of new licences.
The two firms will need to comply with the terms and conditions for a full-fledged bank in the next 18 months.
The RBI said IDFC and Bandhan were recommended as suitable for grant of “in-principle” approval by the High-Level Advisory Committee (HLAC) headed by former Governor Bimal Jalan.
RBI governor Raghuram Rajan, while enumerating the mid-term monetary policy on Monday, had said that the government and RBI will work for more licences from now on and licences would be “on-tap.”
The HLAC in its recommendations said that in the case of the Department of Posts, which had applied for a licence, “It would be desirable for the RBI to consider the application separately in consultation with the government.”
The application submitted by Department of Post has now been recommended to a high-level screening committee for further action and consultation with the Government.
Besides India Post, the other applicants included state-run IFCI and private sector Anil Ambani group and Aditya Birla group, Bajaj Finance, Muthoot Finance, Religare Enterprises and Shriram Capital.
According to reports, RBI originally received 27 applications in July 2013, after which Tata Sons and Videocon Group withdrew, leaving 25 contenders in the fray.
Following the in-principle clearance to these two entities, Secretary Financial Services, GS Sandhu said, “It will pave way for more entities to come forward and spread financial inclusion. It augurs well for the economy and banking sector.”
At present, India has 27 public sector banks and 22 private sector banks in the country.
The RBI has issued bank licences after a gap of a decade. It last awarded licences to Kotak Mahindra Bank and Yes Bank in 2003-04.
The central bank, however, clarified that “until a regular licence is issued, the applicants would be barred from doing banking business.”