Election Commission allows RBI to grant new bank licences

The Election Commission on Tuesday gave green signal to the Reserve Bank of India (RBI) for "in-principle" grant of licences for setting up new banks.

Since the Model Code of Conduct (MCC) came into operation on March 5, after the announcement of the general election schedule, the RBI had written to the Commission on March 12 seeking clarity on the issue of grant of new bank licenses.

"The Commission is of the view that the Reserve Bank of India (RBI) may take necessary action (for grant of in-principle approval for banking licences) as deemed appropriate," the EC Principal Secretary K. Ajaya Kumar wrote to RBI Governor Raghuram Rajan.

The RBI had earlier planned to issue new bank licenses in March after a gap of ten years. The RBI had received 27 applications initially. Later, Tata Sons and Value Industries withdrew, leaving 25 contenders in the race.

Earlier in the day, Dr. Rajan while unveiling bi-monthly monetary policy in Mumbai had said that once the central bank gets the Elections Commission's approval it would expedite the process and grant licences.

"Once they (EC) say there is no issue there, they (RBI) would be in a position to announce the bank licences very quickly after taking it to the committee of the central board," Dr. Rajan had said.