On April 2, 2014, a few days before India went to the polls for its 16th general election, the country’s central bank, the Reserve Bank of India (RBI), finally announced the names of the private sector players it was granting banking licences to. Although it came amid election campaign season fever, the banking industry paid close attention to the announcement. After all, the process of granting new banking licences had been in motion since 2010, when the then finance minister and now president, Pranab Mukherjee, had announced in his budget speech for 2010 to 2011, that corporate houses would be allowed to set up new banks.
In the end, none of the corporates that applied for banking licences, including names such as Reliance, Bajaj and Aditya Birla, made the cut. The RBI, which has always expressed strong reservations about allowing corporates into the banking sector, gave the in-principle banking licences to just two of the 25 applicants: infrastructure finance company IDFC and the country’s largest microlender, Bandhan Financial Services.
