RBI to Issue Draft Guidelines for NBFCs by January

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Nov. 2 – The Reserve Bank of India  said on Monday that it will release draft guidelines  for the entry of new banks into the country’s banking market by January, something India’s non-banking financial companies (NBFCs) have been requesting for a while now.

“Based on the comments and suggestions received from various parties and discussions held with major stakeholders in October 2010, it is proposed to put the draft guidelines in public domain by end of January 2011,” the RBI said in its second quarter policy review.

Tata Capital, Mahindra Finance, Reliance Capital, IndiaBulls, Religare, IL&FS and Aditya Birla Financial Services are among the companies looking to receive banking licenses.

Such companies already operate in financial markets in India through lending, purchasing or selling shares, stocks, bonds, or other marketable securities. A change made in August allows them to hedge against their exposure to global fluctuations in currency by purchasing foreign currency futures.

If granted, a banking license will endow them with full legal status as banks, giving them the ability to issue checks and participate in deposit insurance and credit guarantee programs.

India’s finance ministry said last week that it expects the RBI to issue banking licenses to some new players by the end of this fiscal year.

“We hope some of the licenses will be issued this financial year,” Financial Services Secretary R. Gopalan said.