Deciding there is no violation of model code of conduct in granting new banking licences, the Election Commission has allowed the Reserve Bank of India (RBI) to go ahead provided it is permissible under provisions of the RBI Act, 1934 and Banking Regulation Act, 1949.
dna had reported last week that the Commission was expected to give its nod to RBI's request seeking banking licence anytime soon but by adding a caveat to play it safe.
The RBI, in a letter to the chief election commissioner V S Sampath, on March 12 had asked the Commission whether it would be appropriate for it to go ahead with the announcement of in-principle approvals for banking licences in view of the current enforcement of the model code of conduct. The model code had come into effect on March 5, after the EC declared the schedule for 2014 Lok Sabha elections.
A cautious EC flagged the timing of the RBI's request and sought further clarification as to why the RBI waited for so long when it could have taken a decision through established procedure during the last two years or can go ahead after the elections.
The RBI, wanting to grant banking licence to two entities out of a total of 25 probable applicants, maintained in its reply that the government had already announced the decision of giving new banking licenses before the election notification.
In a press briefing too, RBI governor Raghuram Rajan had said that he would certainly want the EC to be okay with issuance of licences at this stage, though the process had taken place over the past year.
Playing safe, the RBI is expected to issue banking licences to non-controversial semi-government entities and not to any industrial house as was the government's intention, according to sources.
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