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Poll panel raises red flag on bank licence timing

This article was posted on Mar 20, 2014 and is filed under Market News

After getting RBI proposal for two licences, EC to seek clarity; decision likely by month-end

The Election Commission (EC) has expressed its reservations on the timing of the Reserve Bank of India’s (RBI) proposal to grant new banking licences to two of the 25 applicants.

“There are certain issues for which we need more clarity and are writing to the RBI,” an EC official said on the condition of anonymity, adding the poll panel would take a decision by the end of this month.

EC received the RBI proposal in the first week of this month, soon after the model code of conduct came into force on March 5. “The RBI had asked for our permission to clear two banking licences. The reason it cited was that the government had already announced giving new bank licences before the elections were notified. The central bank also said the relevant banking rules were notified way in advance,” said another high-ranking EC official. The official didn’t want to be named because of the sensitivity of the matter.

The official said if everything was planned and announced in advance, there was no reason why the licences could not have been allotted earlier. “Why did the RBI have to wait for the electioneering process to begin? We are also considering whether this can wait for another two months, by when the election results would be out,” he added.

Another area of concern is whether the allotment of bank licences at this stage would give an undue electoral benefit to the Congress-led United Progressive Alliance (UPA) government in the elections. “RBI is an independent body and should not be seen as taking sides,” the official said.

The final decision will be taken by the three-member Election Commission, headed by Chief Election Commissioner V S Sampath. The other two commissioners are H S Brahma and Nasim Zaidi.

RBI Governor Raghuram Rajan had said at a media conference earlier this month that he would certainly want the EC to be okay with issuance of licences at this stage, though the process had taken place over the past year. Rajan had also said the RBI would be able to issue banking licences in the next few weeks of getting the go-ahead.

An expert committee under former RBI governor Bimal Jalan had given its final recommendations to the central bank after scrutinising all the 25 applications.

For more visit: Business Standard

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