Reserve Bank of India's discussion paper on licensing of new private banks

• The Reserve Bank of India's discussion paper on licensing of new private banks has invited widely divergent comment.

• The document, which stopped short of laying down guidelines, only indicated possible approaches and spelt out the pros and cons of each of them, after reviewing the domestic and international experience.
  
• The six key issues that have elicited good response are: minimum capital requirement; promoters' contribution; cap on promoters' shareholding; foreign shareholding; role for industrial houses and non-banking finance companies (NBFCs); and business models for the new banks. The feedback and suggestions have varied, depending on the interests they represented. For instance, industry associations and trade have favoured a higher initial capital of Rs.1,000 crore, which could be raised further over a period. Only with a large capital can the new banks invest in technology, goes their argument. The NBFCs and the microfinance institutions, on the other hand, want a lower level of capital so that more banks can be licensed in a short period.