Bank Licensing in India: History and Brief Timeline

Bank Licensing in India – Timeline. History and brief timeline on bank licensing in India, New Bank License.

1947-1969: Following a spate of mergers and amalgamations, the number of commercial banks in the country decreased from 640 in 1947 to 85 in 1969.

RBI-Reserve-Bank-of-IndiaState Bank of India Act 1955: Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve Bank of India, which is India’s central bank, acquired a controlling interest in the Imperial Bank of India. On 1 July 1955, the Imperial Bank of India became the State Bank of India. Later Government of India acquired the Reserve Bank of India’s stake in SBI.

State Bank of India (Subsidiary Banks) Act 1959: In 1959, the government passed the State Bank of India (Subsidiary Banks) Act, which made eight state banks associates of SBI.

Bank Nationalization:

On July 19, 1969: The Government of India promulgated Banking Companies (Acquisition and Transfer of Undertakings) ordinance 1969 to acquire 14 bigger commercial banks with with deposits over 50 crores with the basic objective of ensuring credit flow to priority sectors of the economy.

April, 1980: The next round of nationalization took place in April 1980. The government nationalised six banks with deposit over 200 crores. This move led to a further increase in the number of branches in the market, increasing to 91% of the total branch network of the country.

Bank Liberalization:

January, 1993: Reserve Bank of India (RBI) released guidelines for licensing of new banks in the private sector. 10 new banks were formed on the basis of these guidelines. These were Global Trust Bank, ICICI Bank, HDFC Bank, Axis Bank, Bank of Punjab, IndusInd Bank, Centurion Bank, IDBI Bank, Times Bank and Development Credit Bank.

January, 2001: RBI revised the guidelines for new bank licences. Two new banks — Kotak Mahindra Bank and YES Bank — were formed.

Current procedure for Bank Licenses

February 26, 2010: Former finance minister and now president Pranab Mukherjee announced in his budget speech (for 2010-11) that companies and business houses will be allowed to set up new banks.

August 11, 2010: RBI released discussion paper on entry of new banks in the private sector.

December 23, 2010: RBI released gist of comments from the feedback on the discussion paper.

August 29, 2011: RBI released draft guidelines for licensing of new banks in the private sector.

July 10, 2012: RBI released gist of comments from the feedback on the draft guidelines.

February 22, 2013: RBI released guidelines for licensing of new banks.

July 1, 2013: Last date for submitting applications for new banking licence. RBI disclosed names of 26 applicants for new banking licence — two of them drop out while one new player gets added to the list later.

September 4, 2013: RBI governor Raghuram Rajan announced setting up of a committee headed by Bimal Jalan to screen the applications.

November 1, 2013: Bimal Jalan committee held its first meeting.

February 25, 2014: Bimal Jalan committee submitted its report to RBI.

March 12, 2014: RBI sought Election Commission’s permission to issue in-principle approvals for banking licence.

April 1, 2014: Election Commission allowed RBI to issue new bank licences.

April 2, 2014: RBI granted in-principle approval to IDFC and Bandhan Financial Services to set up banks. The in-principle approval will be valid for 18 months.

Differentiated bank licence:

May 29, 2014: The Reserve Bank of India (RBI) will finalize the guidelines for issuing differentiated banking licences within the next four months after which such licences will be issued on tap, financial services secretary Gurdial Singh Sandhu said on May 29, 2014. The financial services department briefed new finance minister Arun Jaitley on the working agenda for the department.

One thought on “Bank Licensing in India: History and Brief Timeline

  1. Abhilash Kumar Ananad says:

    As mentioned Bank Liberalization ( January 1993) IDBI Bank Ltd was never a private bank.it was established as a DFI in 1964.From 2004 Bank established itself into commercial activities.It is wholly owned and controlled by GOI similar as SBI.

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