The Reserve Bank of India has granted ‘in-principle’ approval to IDFC and Bandhan Financial Services to set up banks in India. The approval will be valid for a period of 18 months during which the two entities have to comply with the requirements under the guidelines and fulfil the other conditions as may be stipulated by the RBI. On being satisfied that they have complied with the stipulated conditions which are part of ‘in-principle’ approval, they would be considered for grant of licences for commencement of banking business. They cannot carry out banking business until the license is granted. RBI said in a statement that some entities that did not qualify for a full-fledged banking licence in this round could again apply in future rounds or apply for differentiated licences under the proposed framework. RBI said the two applicants were also recommended as suitable for grant of ‘in-principle’ approval by the High Level Advisory Committee (HLAC) set up by the RBI. The HLAC had also recommended that in the case of India Post which has applied for licence, it would be desirable for the RBI to consider the application separately in consultation with the government. The RBI has accepted the recommendation of the HLAC. Among those who had sought banking licenses were LIC Housing Finance, Edelweiss, IFCI, Indiabulls Housing Finance, Magma Finance, Muthoot Fincorp, India Infoline, JM Financial, Aditya Birla Nuvo, Bajaj Finserv, Shriram Capital, Religare Enterprises, Reliance Capital, SREI Infrastructure Finance, L&T Finance and Janalakshmi Financial Services.
IDFC is India’s leading integrated infrastructure finance player providing end to end infrastructure financing and project implementation services. It has among its shareholders private equity investor Actis besides Khazanah and Government Pension Fund Global, the sovereign wealth funds of Malaysia and Norway, respectively. Bandhan is a micro finance company, backed by IFC and SIDBI.
The process to issue bank licences was started in February 2010, after a budget announcement with the objective of promoting financial inclusion. Three years later, the RBI released the final licensing guidelines in February 2013.