According to the proposal of a committee of Reserve Bank of India (RBI), the Banking Regulation Act 1949 can be reformed and license can be issued to big corporate houses. Apart from this, the committee has proposed to increase the promoter’s stake in the bank to 26 per cent from the present 15 per cent in the long run (15 years). In such a situation, it will be interesting to know what is the status of the number of banking licenses issued by the RBI to the private sector till date. The central bank has so far issued 14 banking licenses in three phases for the private sector. In the first phase, only 6 banks are left in the banks started under 10 banking licenses.
Approval to open private bank in 1993 after liberalization
After the decision to nationalize 14 banks in 1969 and 6 banks in 1980, private companies were allowed to open banks in 1993. In the first phase after this decision, in the financial year 1993-94, the RBI issued 10 banking licenses, of which four were promoters of financial institutions. Three licenses were given to individual banking professionals, a co-operative bank, an NBFC and a media house.
10 banking licenses issued in first phase
Nearly 27 years have passed since the RBI gave banking licenses in the first phase, now, only 6 of those who were licensed at that time are still working. The rest had to be merged with other private sector banks. The ten banks for which banking licenses were obtained are as follows.
- ICICI Bank
- HDFC bank
- UTI Bank (later renamed Axis Bank)
- Bank of punjab
- IndusInd Bank
- Centurion Bank
- IDBI Bank
- Times Bank
- Development Credit Bank (DCB Bank)
- Global Trust Bank
Merger of these banks
Four of the ten banks to which RBI had given banking licenses merged with private banks.
- Global Trust Bank merged with Oriental Bank of Commerce in August 2004 due to cash crisis.
- In February 2000, Times Bank merged with HDFC Bank.
- In June 2005, Bank of Punjab was acquired by Centurion Bank and Centurion Bank of Punjab came into existence.
- After this, in May 2008, HDFC Bank took over the Centurion Bank of Punjab.
6 banks of the first phase exist today
Of the 10 banks that were granted licenses by the RBI in the first phase, six banks are still in existence. Apart from this, ICICI Bank, HDFC Bank and Axis Bank (earlier UTI Bank) are also among the big banks.
When the RBI issued banking licenses under the first phase, then the financial institutions of the time, UTI, ICICI and IDBI were given banking licenses. After this, other banking licenses were gradually issued.
4 banks got licenses in second and third phase
In the second phase, RBI granted banking licenses to two more banks Yes Bank and Kotak Mahindra Bank in 2003-04. Talking about Yes Bank, till a few years ago this bank had the lowest NPA ratio in the banking industry, but after this the conditions deteriorated so fast that the central government had to come forward to save it. In the third phase, RBI has given banking licenses to two more banks Bandhan Bank and IDFC First Bank in 2014-15. Four banks have got licenses in the second and third phases, of which the condition of the rest of the banks except Yes Bank is correct.