The finance ministry seems to be reluctant in leeping public sector entities in the list of aspirants for banking licenses.

The ministry backs its stand saying that PSUs' entry into banking industry would spoil the banking ambitions of government sponsored NBFCs like the Power Finance Corporation (PFC) which wants to set up a bank in the country.

"These entities have been set up for meeting funding requirements of a specific sector," said a senior finance ministry official.

The ministry also feels that licenses to PSUs would come against its way of bringing consolidation amongst public sector banks.

The apex bank is expected to come with a discussion paper on the guidelines for granting banking licenses by this weekend. The finance minister had expressed his view in the union budget 2010-11 that there is a need for more banks to be set in the country in order to achieve the goal of total financial inclusion in the country.

Many private sector players like Reliance Capital, Mahindra, Cholamandalam and Tata Finance are keen on grabbing banking licenses.