India's central Reserve Bank of India said on Monday that it had received 26 applications for new banking licences, in the first opening of the market in more than a decade.
Large industrial groups have for the first time been allowed to apply, with the Tata group, Anil Ambani Reliance, engineering giant Larsen and Toubro and the Aditya Birla group taking advantage of the new regulations.
The application deadline expired at 1215 GMT on Monday, with licences set to be handed out from next March.
The Bajaj group, LIC Housing, Religare Capital Markets, Infrastructure Development Finance Company (IDFC), Edelweiss, India Infoline and Industrial Finance Corporation of India (IFCI) have also applied.
Other firms include SREI Infrastructure, Tourism Finance Corp and India's state-run postal department, which has 90 percent of its 154,822 branches in rural areas.
The new opening, overseen by the central bank, is aimed at pushing banking services into rural areas with the new lenders obliged to have at least a quarter of their branches outside of cities.
Only 8-10 of the applicants will be successful, with the Reserve Bank of India (RBI) set to publish the list of applicants on its website in the next few days, according to a spokeswoman.
India's banking sector is still dominated by state-run lenders and in the last 20 years only 12 private banks have been allowed to open.
The country has 26 public-sector, 22 private and 40 foreign banks.
Indian conglomerate Mahindra and Mahindra which had initially expressed interest, opted out due to "disadvantageous" and unclear guidelines.
The new lenders, which have a minimum capital requirement of five billion rupees ($85 million), will also have to favour "priority" sectors of housing, agriculture and education.
About 480 million of India's 1.2 billion people, mostly living in the country's 630,000 villages, currently have no banking access, according to the RBI.
To protect the new system, the RBI says that those seeking to set up a bank "should have a past record of sound credentials and integrity, be financially sound with a successful track record of 10 years".