India gives new banks more time to set up

Adds six months to start-up time.

The Reserve Bank of India, the central bank, added six months to meet a demand from potential applicants for banking licenses. The deadline to apply for bank licenses is July 1.

Companies that want to organize banks, however, will have to comply with all central bank rules and start operations within 18 months of receiving its “in-principle approval.” The validity period of the approval was 12 months previously.

Analysts said this change is expected to provide sufficient time for companies with in-principle approval to comply with all the rules. Aspirants will have to create a holding company that will house the bank and all their other financial-services businesses.

, the RBI said. They will have to separately approach regulators such as the Insurance Regulatory and Development Authority and the Securities and Exchange Board of India to bring their nonbank financial services entities under the holding company, it said.

The banking system is dominated by state-run banks that account for three quarters of the sector's assets. RBI has issued only 12 licenses since 1991.

Under the rules announced February, one in every four branches of new banks must be in rural areas, a step aimed at extending financial services to millions of Indians that don't have access to the banking system.