Tata Sons, IDFC, India Post, and Suryamani Financing are among 26 entities seeking a bank license from the Reserve Bank of India (RBI), which says it will only grant licenses to a few applicants even if all meet guidelines. Lesser known companies like Suryamani Financing and INMACS Management Services also applied. Of the 26 applications, RBI can eliminate 17-18 and will likely grant licenses to 4-5 of the top 7-8. Around 10 non-banking finance companies are also seeking licenses despite restrictive reserve requirements. The RBI clarified it will be very selective in considering applications and may not grant licenses to all eligible applicants.
1. Marquee Names Lining up to Enter Bank Street
Tata, Birla, Ambani and India Post among hopefuls; some
lesser knowns too in queue
Tata Sons, IDFC, India Post and Suryamani Financing are among the 26 entities
seeking a bank licence which the Reserve Bank of India said will be granted only to a
few even if everyone meets the guidelines.
The aspirants include the Aditya Birla Group, which has interests ranging from telecom
to aluminium, and Reliance Capital of Anil Ambani — which has presence in power and
roads, besides financial services.
Lesser-known names such as Suryamani Financing Co from Kolkata (owned by Dunlop
Tyres’ Pawan Ruia), auditing firm INMACS Management Services and Smart Global
Ventures, Noida, have also thrown their hats in the ring, applicant names published on
the RBI website show. “Of the 26 applications, the RBI can easily eliminate 17-18 and
of the 7-8 considered, the central bank will give out 4-5 licences,” said Ashwin Parekh at
consultants Ernst & Young. “Guidelines were very onerous to apply and under the
current structure, scope for niche or specialised banking is restricted.”
Submission of applications ends a 10-year drama of permitting more banks in a country
where more than half the population has not walked into a bank despite nationalisation
four decades ago.
The list of applicants saw surprising additions and dropouts. 10 NBFCs Also Eyeing
Licences
Mahindra & Mahindra Financial, which has been pitching on its rural presence to carry
out the government’s financial inclusion agenda, pulled back citing inflexible guidelines
from the RBI. There have been additions such as Value Industries Ltd, Aurangabad,
backed by Videocon Industries, which realised a windfall from the sale of its stake in
Mozambique oilfields.
“The current set of guidelines, as clarified, has an adverse economic and operational
impact on the business of larger non-banking finance companies,” said Mahindra. “A
time-bound co-existence of a NBFC and a bank in the same group would help set up a
sustainable model and address the concerns of all stakeholders.” Around 10 non-banking
finance companies, including L&T Finance, LIC Housing Finance, Shriram Capital,
Aditya Birla Nuvo and Bajaj Finserv are seeking to own a bank despite what some
describe as onerous reserve requirements.
“There is no predetermined number. The RBI will be very selective while considering
2. applications for new bank licences. It will look for very high-quality applications. It
may, therefore, not be possible to issue licences to all the applicants meeting the
eligibility criteria,” the RBI said in its clarifications issued on June 3. Indeed, the
applicants face yet another obstacle in the form of a key objective of the policymakers
— financial inclusion, which may disturb their returns calculations.
“One of the criteria for evaluating the applications that we get in due course of time will
indeed be their business plan for financial inclusion,” RBI Governor D Subbarao had
said. “Banks consider this as an obligation and not an opportunity.” Some high-profile
firms are also among the candidates. JM Financial, the investment banking and financial
services franchise run by Nimesh Kampani, has roped in former Citigroup chief
executive Vikram Pandit to bolster its chances. Other requirements such as priority
sector targets and 25% branches in unbanked rural areas could be some of the big
challenges for these new banks.
Brokerage firms such as Edelweiss, India Infoline and Religare are also in the fray. New
banks may find it difficult to build low-cost accounts when new-generation private
sector banks are offering 6-7%.
The RBI has clarified that it will not give any form of dispensation to applicants. Stocks
of many aspirants were up during the day. But some are expecting the central bank to
relax the norms given their current structure.
The Shriram Group is seeking exemption from transferring its transport funding business
into a new bank since it may dilute the business prospects due to cultural issues.
Shares of Reliance Capital rose 7.31% to Rs 361 while L&T Finance gained 2.1% to Rs
80.15. The Aditya Birla Nuvo stock was up 3% at Rs 1,095.
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