Loan defaulters rejected from availing bank license
By Vaibhav Aggarwal
Jun 2, 2010
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The RBI and Finance Ministry are being very selective in deciding the issue of bank license being granted to corporate houses. The apex bodies have decided to refrain themselves from granting licenses to any such body which is involved in faulty transactions.

According to a finance ministry official, as per the proposal made by the finance minister in the Union Budget, regarding new licenses being issued for banking to corporate bodies, the books and accounts of these would be checked in detail before taking any final decision.

The scrutiny has been mandated so as to avoid any delinquencies that were faced from the part of Bank of Rajasthan. "The banking regulator and the ministry have agreed that there should be a scrutiny of the accounts of those seeking licences to assertion whether the promoters have defaulted on any loans," the official said.

Leading corporate houses like ADAG, IndiaBulls and Tatas are in foray to obtain banking license.

"We need to ensure that the banking system grows in size and sophistication to meet the needs of a modern economy. Besides, there is a need to extend the geographic coverage of banks and improve access to banking services," Mr Mukherjee had said in the Union Budget while suggesting the need for setting up more banks by issuing fresh licenses to eligible corporates and NBFCs.

As part of the scrutiny, the regulators would be seeking the aid of other government regulatory bodies in order to confirm that the debt condition and financial dealings of the license seeker would not be coming as a hurdle to the banking entity.

Under the existing regulations, the initial minimum paid-up capital for a new bank should be Rs 200 crore and the promoter's contribution shall be at least 40% of the paid-up capital of the bank at any point of time.


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