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 eye licences
Mahindra & Mahindra Financial, which has been pitching on its rural presence to carryout the financial inclusion agenda of the government, 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.
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"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 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.
Source:-The Economic Times
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