Dear Readers,
Bank Licensing in India- Timeline:
1947-1969: Following a spate of mergers
and amalgamations, the number of commercial banks in the country decreased
from 640 in 1947 to 85 in 1969.
State Bank of India Act 1955: Pursuant to the
provisions of the State Bank of India Act of 1955, the Reserve Bank of India,
which is India’s central bank, acquired a controlling interest in the
Imperial Bank of India. On 1 July 1955, the Imperial Bank of India became the
State Bank of India. Later Government of India acquired the Reserve Bank of
India’s stake in SBI.
State Bank of India (Subsidiary Banks) Act 1959: In
1959, the government passed the State Bank of India (Subsidiary Banks) Act,
which made eight state banks associates of SBI.
Bank Nationalization:
On July 19, 1969: The Government of India
promulgated Banking Companies (Acquisition and Transfer of Undertakings)
ordinance 1969 to acquire 14 bigger commercial banks with with deposits over 50
crores with the basic objective of ensuring credit flow to priority
sectors of the economy.
April, 1980: The next round of
nationalization took place in April 1980. The government nationalized six banks
with deposit over 200 crores. This move led to a further increase in
the number of branches in the market, increasing to 91% of the total branch
network of the country.
Bank Liberalization:
January, 1993: Reserve Bank of
India (RBI) released guidelines for licensing of new banks in the
private sector. 10 new banks were formed on the basis of these guidelines.
These were Global Trust Bank, ICICI Bank, HDFC Bank, Axis Bank, Bank of
Punjab, IndusInd Bank, Centurion Bank, IDBI Bank, Times Bank and
Development Credit Bank.
January, 2001: RBI revised
the guidelines for new bank licences. Two new banks — Kotak Mahindra
Bank and YES Bank — were formed.
Current procedure for Bank Licenses
February 26, 2010: Former
finance minister and now president Pranab Mukherjee announced in
his budget speech (for 2010-11) that companies and business houses will
be allowed to set up new banks.
August 11, 2010: RBI released discussion
paper on entry of new banks in the private sector.
December 23, 2010: RBI released gist of
comments from the feedback on the discussion paper.
August 29, 2011: RBI released
draft guidelines for licensing of new banks in the private sector.
July 10, 2012: RBI released gist of
comments from the feedback on the draft guidelines.
February 22, 2013: RBI
released guidelines for licensing of new banks.
July 1, 2013: Last date for
submitting applications for new banking licence. RBI disclosed
names of 26 applicants for new banking licence — two of them drop out
while one new player gets added to the listlater.
September 4, 2013: RBI
governor Raghuram Rajan announced setting up of a committee
headed by Bimal Jalan to screen the applications.
November 1, 2013: Bimal
Jalan committee held its first meeting.
February 25, 2014: Bimal Jalan committee
submitted its report to RBI.
March 12, 2014: RBI sought Election
Commission’s permission to issue in-principle approvals for
banking licence.
April 1, 2014: Election
Commission allowed RBI to issue new bank licences.
April 2, 2014: RBI granted in-principle
approval to IDFC and Bandhan Financial Services to set-up banks. The
in-principle approval will be valid for 18 months.
Differentiated bank licence:
May 29, 2014: The Reserve Bank of India (RBI)
will finalize the guidelines for issuing differentiated banking
licences within the next four months after which such licences will be issued
on tap, financial services secretary Gurdial Singh Sandhu said on May 29, 2014.
The financial services department briefed new finance minister Arun Jaitley on
the working agenda for the department.
