India issues clarifications on new bank licenses

Norms seem to favor large corporations, however.

Analysts said the clarifications issued by the Reserve Bank of India, the central bank, on new bank license norms this week leave lesser room for regulatory discretion and disputes and will be an incentive to very serious players to finally seek licenses.

The clarifications, however, seem to favor large corporations and not non-banking finance companies or NBFCs.

Analysts said the norms will hurt many, especially NBFCs as the guidelines look favoring corporates over NBFCs, because the new guidelines are quite tough. NBFCs seem to have a lesser chance than corporates in acquiring the new banking licenses.

Only a few licenses, probably three to four out of some 30 applications, will be issued.

The clarifications on the non-operative finance holding company ensures that the new structure will not pose any systemic risks as these norms have ring-fenced the system.