Guidelines fair and open to all, says India Inc
Corporate India has unanimously said the Reserve Bank of India (RBI)’s norms on new banking licences are fair and open to all, as these don’t bar any specific group from applying for a licence.
Sunil Godhwani, managing director of Religare Enterprises, said, “RBI’s norms have been well received, as there is no restriction on any category." Companies aspiring for banking licences believe the move would change the financial services industry, as more banks would lead to more competition and improved penetration.
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Bharat Doshi, chairman of Mahindra & Mahindra Financial Services, says the suspense for industrial houses has ended. He adds the guidelines clearly state the private sector, the public sector and existing non-banking financial companies (NBFCs) would all be eligible.
Ajay Srinivasan, chief executive (financial services), Aditya Birla Group, welcomed the move. He said this would lead to sweeping changes in the financial services sector, as more banks would mean more people coming into the system.
Though 85 per cent Indians have mobile phones, only 45 per cent have bank accounts. With new banks coming into the system, there would be greater competition and better reach.
RBI’s guidelines specifically state an aspirant’s business plan should be “realistic and viable and should address how the bank proposes to achieve financial inclusion".
Chandrajit Banerjee, director general of the Confederation of Indian Industry, welcomed the new guidelines. “The mandate of opening 25 per cent of new branches in un-banked areas will ensure the population excluded earlier gets the benefit of banking," he said.
Some aspirants believe even if fewer licences are issued, big companies, with their large footprints, would be able to meet the criteria in the final guidelines. Analysts believe the financial services arms of Mahindra & Mahindra, Larsen & Toubro, Aditya Birla Group and Bajaj Finserv have very good chances of securing licences. Today, the Videocon Group indicated it would apply for a banking licence. In the final guidelines, RBI has been silent on the branding of banks after large corporate houses. Some aspirants say rather than this being a liability, naming a bank after a large company could be used to inspire trust.
Several large companies have non-banking financial services arms that offer loans and broking, insurance and asset management services.
According to RBI’s new norms, if non-banking financial companies (NBFCs) applying for a licence carries out activities not permitted for a bank, a separate structure would have to be set up for these activities. Aspirants do not see this as a problem, as most banks have NBFCs.
Most companies believe the RBI guidelines make it clear the central bank would look at an applicant’s track record in financial services and its ability to roll out operations.
Godhwani says, “The central bank wants companies that are experienced in managing a financial services business, with a credible background. We believe we are well placed to apply for the licence and if given the opportunity, we would target to be an ethical bank, with penetration across the country."
While some real estate companies that are struggling with bloated balance sheets might not want to consider starting a bank, others are likely to do so. DLF Group Executive Director Rajeev Talwar said, “We won’t be looking at it. We are concentrating on our core business at the moment."
However, others such as Supertech and Sobha Developers believe financially strong real estate companies might grab the opportunity.
R K Arora, chairman and managing director of Supertech, says, “We will definitely look into it now. Earlier, there was no clarity. So, we didn’t formulate any plan."