Banking Sector

• There have been amendments proposed to the Banking Regulation Act in the context of additional banking licences to be provided to private sector players.
• Rs 6,000 crore to be provided during 2011-12 to enable public sector banks to maintain a minimum of Tier I CRAR of 8 per cent.
• To take the process of financial sector reforms further, various legislation proposed in 2011-12.
• Target of providing banking facilities to all 73,000 habitations having a population of over 2,000 to be completed during 2011-2012.

The much awaited banking licences to be provided to private sector players might see the light of the day in the coming fiscal by proposed amendments to the Banking Regulation Act. This will be particularly beneficial to those NBFCs (Non Banking Financial Corporation) who are aspiring to get a licence. The main players among them are Reliance Capital, Bajaj Finance etc., who saw a spurt in their share prices. In addition to this the budget brought some good news for the existing PSBs that have a Tier I Capital to Risk-Weighted Asset Ratio (CRAR) of less than eight per cent. Some of the banks that will get help from this are Bank of Maharashtra, Andhra Bank, Central Bank of India etc. 

The other proposal of spreading banking facilities to all 73,000 habitations having population of over 2000 is going to boost the branch network of banks however it needs to be seen how they are going to be benefited as opening new branches entails a cost. Over all we feel that the budget was quite positive for the banking sector as whole.