Indian parliament thumbs down new bank licenses

Presents government with a massive problem.

The Parliamentary Standing Committee on Finance is against the Reserve Bank of India's move to grant new bank licenses to business firms. It is also against RBI’s discretionary powers to apply the fit and proper eligibility criteria.

The committee said that bank licenses are not given to business firms anywhere in the world and such a practice should not be allowed in India. It also recommended the minimum capital requirement of US$79 million should be doubled to ensure the sustainability of the new banks.

A report to this effect has been finished and will be submitted to the government this week. Analysts said the report could have a significant impact on the process of handing out bank licenses that began last February. The licenses are expected to be awarded in early 2014.

A total of 26 banking license applications were received by the central bank.