On 1 July 2013, the Reserve Bank of India (RBI) disclosed that it had received 26 applications from private sector entities for licences to establish new banks. The applicants included prominent financial and industrial concerns such as Edelweiss, L&T Finance, Reliance Capital, Videocon Group and Tata Sons, although Tata Sons and the Videocon Group later withdrew their applications. After an initial screening of applications by the RBI, the applications were further scrutinized by the High Level Advisory Committee (HLAC) established by the RBI.
The winners
Based on the recommendations of the HLAC, the RBI on 2 April 2014 granted “in-principle” approval to two applicants, namely, IDFC Limited and Bandhan Financial Services Private Limited, to establish new banks. The application of the Department of Posts was reserved for further consultation with the central government.
The “in-principle” approval is valid for 18 months, and the successful applicants are to be granted a licence to commence banking business in India based on their compliance with the conditions mentioned in the “in-principle” approval.
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Sawant Singh is a partner and Aditya Bhargava is a principal associate at the Mumbai office of Phoenix Legal.
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