RBI gets 26 applications for bank licence

Among the big corporate houses include Tatas and Aditya Birla group in the race to set up a bank

July 02, 2013 10:02 IST | India Infoline News Service

The RBI has received 26 applications for new banking licences until Monday.

India Infoline Ltd (IIFL Group), India’s leading financial services provider, submitted its application to the Reserve Bank of India for Banking Licence on Monday. IIFL proposes to convert its existing NBFC, India Infoline Finance Limited, into a bank. IIFL is compliant with all RBI guidelines, read along with clarifications issued on June 3, 2013

Among the big corporate houses include Tata, Aditya Birla group, Rahul Bajaj group, Videocon, Anil Ambani group and Larsen & Toubro in the race to set up a commercial bank.

Mr. Nirmal Jain, Chairman, IIFL, said, “A banking licence is a natural progression for our NBFC business. India Infoline Finance Ltd, our NBFC, will get converted into the bank. Given the retail nature of our loan portfolio and distribution infrastructure across the country, we are well placed to drive the financial inclusion agenda as well. We will fully comply with all RBI regulations from day 1 and are not seeking any exceptions.” India Infoline Finance Limited is currently led by Mr. V. K. Chopra, ex-CMD of SIDBI and Corporation Bank.

Besides corporate houses, government department, state-owned companies, a few non-banking financial companies and a couple of microfinance institutions are also in the race to set up a commercial bank.

The central bank has released a list of applicants which includes Aditya Birla Nuvo, Bajaj Finserv, Department of Posts, Edelweiss Financial, IDFC, Indiabulls Housing, LIC Housing Finance, L&T Finance, Magma Fincorp, Reliance Capital, Tata Sons and Religare Enterprises.

Microfinance companies such as Kolkata-based Bandhan Financial and Janalakshmi Financial run by Ramesh Ramanathan are also in the race. INMACS Management Services, a management consultancy.

L&T Finance Holdings board has approved the company’s proposal to apply to RBI for a licence to set up a bank in accordance with the guidelines for new banks, the company said in a statement to the stock exchanges.

Kumar Mangalam Birla, chairman of the Aditya Birla group said on Friday that he is confident of getting new bank licence from the RBI.

He said that license has been sought through Aditya Birla Nuvo, the company which controls the financial services business of the group.

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.

"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.

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.

Subbarao had said that "our effort will be to make that judgement as transparent as objective as contestable as possible ... Not everybody who is fit and proper will be given a (bank) licence because we expect the number of eligible applicants will be much larger than what is meaningful number of licences we can give".

In its clarification, the RBI had said the entities getting licences to open new banks will be given 18 months to open branches, and promoters would have to transfer their holdings to the non-operative financial holding company (NOFHC) in a stipulated period.

The RBI had issued guidelines for 'Licensing of New Banks in the Private Sector' on February 22 and came out with clarifications in the first week of June. It is, however, not yet clear how many new bank licences will be issued.

At present, there are 26 state-owned and 22 private sector lenders. The last time the central bank issued banking licences was in 2002-03. Two licences were issued to Yes Bank and Kotak Mahindra Bank. Over 10 players were allowed in the mid-1990s including ICICI Bank and HDFC Bank.

Just 35% of India's adult population have bank accounts and other financial institutions as against a global average of more than 50%.

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