Licence to open bank branches may go

The mandatory licensing requirement for Indian banks to open branches may be done away with. The department of financial services is taking up the matter with the Reserve Bank of India (RBI) as banks are no more shying away from opening branches in semi-urban and rural areas. The likely relaxation, however, will not apply to foreign banks. “There is a case made out for dispensing with the mandatory licensing requirement with certain transparent safeguards to ensure an equitable distribution of bank branches in the urban and rural areas,” an official source said. RBI might make it mandatory for banks to open one rural or semi-urban branch for every new urban branch that is opened, added the source. Citing a recent speech of RBI Governor Y V Reddy that “many banks now find that branches in semi-urban and rural areas are also commercially viable”, official sources said the entire policy followed by RBI on opening new branches needed to be revisited. Many public and private sector banks have been demanding the removal of the licensing system, which comes in their way to expand organically in a rapid manner. The department has sought views from public sector bank chiefs in this regard.

Bank of Rajasthan divesting 10% stake to raise Rs 167 cr

Jaipur-based private lender Bank of Rajasthan is set to divest nearly 10 per cent stake in the bank to raise upto Rs 167 crore. "The bank will allot shares and convertible warrants to four private equity players - Glasia Mauritius II Ltd, BNP Paribas S A, Shree Naman Developers and Darashaw & Company, who will together invest nearly Rs 167 croe," a source said.

Ministry, RBI differ on NPA classification

The Finance Ministry has taken the view that advances to infrastructure projects that face completion delay exceeding a year need not be classified as non-performing assets (NPAs) by banks so long as the interest component on the loan was being serviced. This stance is, however, in contrast to the Reserve Bank of India (RBI) guidelines that require advances to infrastructure projects delayed by more than a year to be classified as NPAs even if interest was being paid on time. Official sources said this issue had come up for discussion at the meeting that the Finance Minister, Mr P. Chidambaram, had with chief executives of public sector banks (PSBs) on Friday. Indications are that the RBI may again be requested to review the guidelines. “Our view on this is that the account cannot be classified as NPA in situations of delay over one year if the interest is serviced,” a senior Finance Ministry official said.

Canara Bank may make an acquisition this year : Rao

Canara Bank has hinted that during the current year it may acquire a bank which can increase its footprint in the North and West India. "We are still examining it (possibility of acquisition). Definitely in the current year we should see some action," the Canara Bank CMD, Mr B N Rao, said. "We are strong in the South. But actually lot of growth is taking place in the North and the West." While making an acquisition, Canara Bank would prefer a bank that has a good footprint in these areas, he said.