New Round of Banking Licenses Expected in India After Nearly a Decade

India might soon see a new wave of banking licenses after almost a decade. According to a Bloomberg report, officials from the Finance Ministry and the Reserve Bank of India (RBI) are discussing ways to expand the banking sector to promote long-term growth.

The government and the central bank are considering several steps to create more large and robust banks to support India’s ambitious economic development plans in the coming decades. These discussions are still in the early stages, and no final decision has been made yet.

It’s worth noting that this is the first time in nearly a decade that the Finance Ministry and RBI have engaged in talks about expanding the banking sector to boost long-term development within the country. This could pave the way for new bank licenses in India. The report suggests that discussions are focusing on creating bigger, stronger banks, which would support the country’s economic growth.

RBI and Finance Ministry in Deep Discussion

According to the Bloomberg report, the RBI and the Finance Ministry are considering various options. One idea is to allow large companies to apply for bank licenses, despite restrictions on shareholdings.

Another proposal involves encouraging non-banking financial companies (NBFCs) in South India, where companies like Apple are expanding manufacturing, to transition into full banking services. There is also talk of easing restrictions for foreign investors to increase their stakes in banks.

However, neither the Finance Ministry nor the RBI has responded to these reports yet. Bloomberg’s data shows that only two Indian banks, State Bank of India (SBI) and HDFC Bank, are among the world’s top 100 banks. In contrast, banks from China and the US dominate the top 10.

Last Banking Licenses Issued in 2014

The last time the government issued new banking licenses was in 2014. In 2016, large industrial and business groups were barred from obtaining banking licenses. Now, there is a possibility that this policy might be reconsidered.

The news of new bank licenses has clearly impacted the market. On Friday, the Nifty PSU Bank index dropped by 0.8% during early trading but saw a rebound of 0.5% later in the day. This year, the index has seen an increase of nearly eight percent.