The country’s largest conglomerate the $103 Tata Group, the nation’s largest financial behemoth LIC, the Department of Posts, Aditya Birla Nuvo, Reliance Capital and Bajaj Finserv are among the 26 private and public sector entities, one of them from defaulter group company, which have moved their licence applications with the RBI yesterday seeking to enter banking. That makes it 14 non-banking financing companies (NBFCs), as many as four brokerages, two large corporates and two microfinance institutions.
According to analysts NBFCs have the least chance of getting in, due to stiff holding company norms a ban on converting NBFC company into bank holding company. What is interesting is sheer number of aspirants despite stiff entry norms, including an NBFC from the defaulter Dunlop Group, and the final number of new banks that will be allowed to come in later, may be by early next fiscal, will not be even under half a dozen, giving one the biggest possible headache for Subbarao’s successor.
"The Reserve Bank of India in all received 26 applications," the central bank said after the deadline for applying for a bank licence expired Monday. The RBI had issued guidelines for new banks on February 22 and came out with clarifications in the first week of June.
The following are the list of the aspirants most them who will end up as jokers: Bandhan Financial Services, Edelweiss Financial Services. IDFC, IFCI, Indiabulls Housing Finance, India Infoline, Inmacs Management Services, Janalakshmi Financial Services, JM Financial, LIC Housing Finance, L&T Finance Holdings. Magma Fincorp, Muthoot Finance, Religare Enterprises, Shriram Capital, Smart Global Ventures, Srei Infrastructure Finance, Suryamani Financing Company (of Dunlop Group which has defaulted on its payments many times), Tourism Finance Corporation of India, UAE Exchange & Financial Services and Videocon's subsidiary Value Industries are all in the fray.
Governor Subbarao had earlier said that "our effort will be to make that judgement as transparent as objective as contestable as possible…I want to say that 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 NOFHC envisages holding of the bank and other regulated financial services entities of the promoters under the NOFHC and prudential exposure norms for the entities. The Reserve Bank is expected to grant new licences by March next year.
As part of preparatory exercises to get bank licence many business houses roped in foreign banks and entities and even hired global bankers. For example, Anil Ambani-led group's Reliance Capital announced that Japan's Sumitomo Mitsui Bank and Nippon Life would become its strategic partners in the proposed banking venture, with each having 4-5 per cent stake.
Another player, Delhi-based Religare Enterprises proposed to sell 6 per cent stake to Customers Bancorp of US for $51 million (about Rs 300 crore), while former Citigroup chief Vikram Pandit proposed to make a strategic investment in JM Financial. Entities which did not apply for bank licence are Power Finance Corporation, Sahara India, SKS Microfinance. Almost a week before the deadline Mahindra Finance too opted out of process.There are 26 public sector banks, 22 private sector banks and 45 foreign banks apart from 56 regional rural banks in the country.
Ten banks were licenced on the basis of guidelines issued in January 1993. The guidelines were revised in January 2001 based on the experience gained from the functioning of these banks, and fresh applications were invited. Of the 10 licences issued in 1993, four banks merged with other lenders over a period of time. Times Bank merged with HDFC Bank, while Global Trust Bank was amalgamated with the state-owned Oriental Bank of Commerce. Centurion Bank took over Bank of Punjab to become Centurion Bank of Punjab, which merged with HDFC Bank in 2008.
