Impact of new banks on Indian Economy?

The Reserve Bank of India has given green signal for new banking license that said the once the process is completed the new banks would be there in banking sector. Many private companies and non-financial institutions could start private banks in India.

The nationalization of banks is the milestone in Indian banking system that boomed the economy. There are many private banks in India apart from the 19 nationalized banks. The apex bank would aim to check the money laundering and other various norms in the banking before allowing more private players into the banking sectors.

Recently there were reports about the violation of norms by various banks in the media and the RBI has taken stern actions in that directions. Another important duty of the RBI is – its custodian of Indian economy, being playing the role, the bank would try to check the liquidity into the market.

The high inflation and devaluation of rupees against the US dollar are some of the major challenges the RBI has to address with more stern action. Liquidity is the major cause for many fiscal crises in the country and those would be in the priority to-do list of the apex bank.

With the entry of the new banks into the sectors, the task to check the liquidity and cash flow into the market would be big challenge for the apex bank to follow. More branches involve more transactions boosting the velocity of money in the economy.

That could be help the economy in boosting market conditions as well as fueling inflation, as the too much money chasing to too few goods. On the other hand, the credit market would also take a big leap with the entry of new banks; the volume of credit market in terms of loans would go up.

There would another danger for the bank having non-performing assets, which could also have adverse impact on the economy’s health. If the credit market, bad recovery and non-performing assets would go up beyond control the sure that could adverse the growth pace of the Indian economy.

There is no doubt that the new banks would prove positive for the economy , as in the guidelines the apex bank has said that more branches need to be opened in the rural areas. This is going to be the best thing that the bank tried to boom the rural banking sector, which said to be in gloom for many years.

Indian economy needs a big push to keep its growth rate moving forward from 5 per cent to 8-9 percent in coming years. And the entry of new banks could help the economy to revive and cherish during ongoing global economic slowdown.

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Names of 26 Applicants for new bank licenses in the private sector

On Monday Reserve Bank of India released the names of applicants for the new banking licenses in the private sector. Among the major names are Tata Sons, Aditya Birla and Bajaj Finserv, whoi have applied for the new banking licenses.

There are also government entities like Department of Posts, LIC Housing Finance, IFCI and Tourism Finance Corporation of India, who have applied for the same. Here is the full list –

1. Aditya Birla Nuvo Ltd., Mumbai.
2. Bajaj Finserv Ltd., Pune.
3. Bandhan Financial Services Pvt. Ltd., Kolkata.
4. Department of Posts, New Delhi.
5. Edelweiss Financial Services Limited, Mumbai.
6. IDFC Limited, Mumbai.
7. IFCI Limited, New Delhi.
8. Indiabulls Housing Finance Limited, New Delhi.
9. India Infoline Ltd., Mumbai.
10. INMACS Management Services Limited, Gurgaon.
11. Janalakshmi Financial Services Pvt. Ltd., Bangalore.
12. J M Financial Limited, Mumbai.
13. LIC Housing Finance Ltd., Mumbai.
14. L & T Finance Holdings Limited, Mumbai.
15. Magma Fincorp Limited, Kolkata.
16. Muthoot Finance Limited, Kochi.
17. Reliance Capital Limited, Mumbai.
18. Religare Enterprises Limited, New Delhi.
19. Shriram Capital Limited, Chennai.
20. Smart Global Ventures Pvt. Ltd., Noida.
21. SREI Infrastructure Finance Limited, Kolkata.
22. Suryamani Financing Company Limited, Kolkata.
23. TATA Sons Limited, Mumbai.
24. Tourism Finance Corporation of India Limited, New Delhi.
25. UAE Exchange & Financial Services Ltd., Kochi.
26. Value Industries Limited, Aurangabad.

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Big Business in Banking?

In a significant development in issuing new banking licenses, the Reserve Bank of India has allowed all private and public sector companies to apply for the banking licenses, as promised in the Union Budget 2010-11.

The last date to apply for get the bank licenses is July 1, 2013. Now the companies those can afford Rs 500 crore for the minimum paid-up capital for setting up a bank can apply for banking licence.

This is a give move by the RBI to strengthen the banking system in India. With the entry of big business houses into the banking system would not only boost the banking system, but also help proved a milestone.

Last time the RBI had issued banking licence to Yes Bank in 2004.

The big business houses like Tata, Mahindra and Mahindra, Aditya Birla Group, L&T, ADAG and Reliance could apply for the banking licence in India.

There will be more private banks in India, once the licences have been issued to the companies, like given to Yes Bank in 2004.

There 26 public sector banks and 22 private sector banks in India. Soon the number private sector banks would go up, after the licencing process is completed.

However, there are some strict guidelines in the new banking lincences system, which need to be followed by the companies those would apply for it.

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