The Reserve Bank of India has declared that it would be coming out with a discussion paper on guidelines for fresh banking licenses to be issued to private sector entities and NBFCs by the end of July.

The apex bank also said that the discussion once designed would be posted on the website of RBI for comments and queries from the public. The declaration was made by RBI Governor, D. Subbarao when he announced the monetary policy 2010-11.

"Thereafter, detailed discussions will be held with all stakeholders on the discussion paper and guidelines will be finalised based on the feedback," he said.

Moreover, Subbarao further said that all applications in this matter would be referred to an external expert group for examination and recommendation to the RBI for granting licenses.

This move by the RBI follows the announcement made by Finance Minister, Mr. Pranab Mukherjee in his budget speech for the year 2010-11 that new banking licenses should be issued to fresh entities.

"The Indian banking system has emerged unscathed from the crisis. We need to ensure that the banking system grows in size and sophistication to meet the needs of a modern economy. Besides, there is a need to extend the geographic coverage of banks and improve access to banking services," Mukherjee had said.

RBI had private players in consideration for fresh banking licenses. NBFCs may also be considered if they meet eligibility criteria, he had said.