India Inc gears up for bank licence battle

NEW DELHI/MUMBAI Tue Aug 30, 2011 6:53pm IST

A cashier (L) counts currency notes as customers wait inside a bank in Hyderabad March 22, 2010.  REUTERS/Krishnendu Halder/Files

A cashier (L) counts currency notes as customers wait inside a bank in Hyderabad March 22, 2010.

Credit: Reuters/Krishnendu Halder/Files

Related Topics

NEW DELHI/MUMBAI (Reuters) - Indian corporate houses, eager to enter the banking sector, are gearing up to battle for the few licences that the Reserve Bank of India (RBI) is likely to issue.

Analysts and industry players expect the RBI to issue two to five new licences, meaning most of the more than 10 corporate groups that have expressed interest in setting up a bank may be disappointed.

India has not issued a new banking licence since 2004 and has said it will only issue a few new licenses. The RBI is looking to expand access to banking services in a country where more than half of families are outside the formal financial sector.

"Going by the history, I don't think the RBI will issue more than four or at most five licences this time. There will be a lot of filtering, it's going to be stringent," Pradeep Agarwal, analyst with Emkay Broking, said.

Corporate groups including the Tata group and billionaire Anil Ambani's Reliance Capital, which both operate non-banking finance companies (NBFCs), are among those interested in seeking banking licences in a country where lending is growing at about 20 percent a year.

Religare Enterprises, Bajaj Finserv, Aditya Birla group and Mahindra Finance, among others, are also keen to enter the segment.

Religare, controlled by billionaire brothers Malvinder and Shivinder Singh, said on Tuesday it has set up an advisory panel that would help it apply for a licence and is also open to partnership with global lenders.

The Reserve Bank of India's draft guidelines limit foreign shareholdings in start-up banks to 49 percent for the first five years and allow no single foreign owner to hold more than 5 percent. New licence-holders would also be required to list their banks on the stock market within two years.

"They only want serious players who seriously view this business and understand the economics of it over a long period of time," Religare Chief Executive Sachindra Nath told Reuters.

The RBI in its draft guidelines issued on Monday said that it will consider granting licences to private firms with successful track records of at least 10 years and with low exposure to the real estate, construction and broking businesses.

"From a long-term perspective one can grow through banks. Your customer base in a bank is much more diversified, you can sell much more products to your customers, and obviously your funding is easier," said Sam Ghosh, chief executive officer of Reliance Capital.

He said Reliance Capital meets the RBI guidelines and will need to set up a non-operating holding company to seek a licence.

Many firms planning to apply for banking licences already operate non-banking finance companies, which provide mostly small loans to consumers and businesses.

(Additional reporting by Shamik Paul)

FILED UNDER:

"India's Daughter"

Reuters Showcase

Microfinance

Microfinance

Funding the unfunded: India helps small business borrow to grow  Full Article 

Insurance Sector

Insurance Sector

UK healthcare firm Bupa sees strong growth in India  Full Article 

Sensex Rises

Sensex Rises

Sensex edges up; consumer and healthcare stocks rise  Full Article 

Market Eye

Market Eye

FTSE adds nine Indian firms as large-caps in Asia-Pacific ex-Japan index   Full Article 

Indian Ocean Diplomacy

Indian Ocean Diplomacy

PM Modi to ramp up help for Indian Ocean nations to counter China influence  Full Article 

ECB Bond-Buying

ECB Bond-Buying

ECB raises growth forecasts, to start printing money next week  Full Article 

China Economy

China Economy

China signals "new normal" with lower annual growth target  Full Article 

Pharma Sector

Pharma Sector

Panel recommends waiving late-stage trials for some drugs  Full Article 

E-commerce

E-commerce

China backs e-commerce expansion in win for Alibaba, JD.com  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage