Analysing the impact of new bank licensing policy (2013) on Indian economy

Abstract

RBI released the Guidelines for “Licensing of New Banks in the Private Sector” on February 22, 2013. The objective of these guidelines has been to frame a policy structure of new private sector banks and guide the applicants to the selection process. It has been a great opportunity for the private and public sector players to participate in the banking sector which has been growing at a high rate of around 20% since the last decade. However, RBI received 100 applications in 1993 and 113 in 2003 in the first two rounds of granting licences, it got only 26 this time, when about 200 applications were expected. The response from the private sector has been lukewarm and many big players such as Reliance Industries have eventually decided not to apply. This development needs to be investigated in light of how the similar policy had positively impacted the banking industry in 2003 and what should be the more appropriate frame work in current macroeconomic conditions.