Mumbai: The Aditya Birla Group and Reliance-Anil Dhirubhai Ambani Group would ask the Reserve Bank of India (RBI) permission to open new banks once there is more clarity from the banking regulator.
They are two of many Indian firms that may queue up for banking licences, following finance minister Pranab Mukherjee’s announcement that the central bank is considering giving some additional banking licences to private sector firms and non-banking finance companies (NBFCs).
NBFC stocks rose on the Bombay Stock Exchange. Srei Infrastructure Finance Ltd rose 2.79% to close at Rs64.50; Reliance Capital Ltd jumped 8.12% to close at Rs786.45; Muthoot Capital Services Ltd was up 1.91% to close at Rs80; Infrastructure Development Finance Co. Ltd rose 4.69% to close at Rs159.55 and IFCI Ltd jumped 8.1% to close at Rs51.40.
Srei, Reliance Capital, Aditya Birla Financial Services Group and Muthoot are keen to convert themselves into banks.
On the anvil: RBI last granted new licences to banks in 2003. Hemant Mishra/Mint
“This move will potentially open exciting new avenues of growth for Reliance Capital in the future,” said Sam Ghosh, chief executive officer of Anil Ambani-owned Reliance Capital. “We await further details and guidelines.”
“The Aditya Birla Financial Services Group is already a large non-bank player, occupying a significant position across all its verticals,” said Ajay Srinivasan, chief executive, financial services, Aditya Birla Group. “We wholeheartedly welcome this initiative and will definitely apply for a licence.”
But RBI is not in a hurry to issue fresh licences. “We will have to start working on it and ...take into account our experience and what is practical,” deputy governor Usha Thorat said.
“There will be new licences. In the last five years we have not given any new licences. However, while we do this, we will keep in view the basic principles which are already there, mainly diversified shareholding and fit and proper guidelines,” she added. “The basic principles of ownership and governance will remain unchanged, because that has stood the test of time.”
RBI had last granted licences to two banks in 2003.
The existing ownership guidelines restricts the ownership of large industrial houses in banks to 10%. The guidelines on conversion of NBFCs into banks also do not permit NBFCs promoted by a large industrial house or owned and controlled by public authorities, including local, state or Union governments, from converting into banks.
Reliance Capital’s Ghosh said the firm is still waiting to hear from RBI on how it intends to deal with issues such as shareholding patterns or whether NBFCs will get to retain existing holding structure. “Basically, how will these licences be given out and who will get it,” he said.
In his annual general meeting speech in July last year, Anil Ambani had reiterated that his group wanted to own a bank as soon as the country’s regulations allowed private entities to do so.
Tata Capital Ltd, a subsidiary of Tata Sons Ltd, said it would await a firm policy announcement before commenting on the issue.
Thomas George Muthoot, director, Muthoot Pappachan Group, said: “We will be able to decide on our action plans only after receiving the complete details.”
Hemant Kanoria, chairman and managing director Srei Infrastructure Finance, said: “We had been proposing this to the government for quite some time because we sincerely feel this is an idea whose time has certainly come. However, we await the details.”
However, things will not change overnight.
“The implementation of this announcement will depend on RBI,” said Shefali Goradia, partner, BMR and Associates, a consultancy. “The central bank has been very conservative in its dealing with non-banking finance companies. Even if it issues new guidelines, they would be laced with many conditions.”