Home / Markets / Stock Markets /  IDFC Limited, Equitas Holdings shares today surge 20% on RBI banking proposals

Shares of IDFC Ltd, Equitas Holdings Ltd and Ujjivan Financial Services surged today following release of RBI's panel's report that recommended changes to banking regulations. IDFC shares surged 12% to 40.10, Ujjivan Financial Services 15% to 285 and Equitas Holdings Ltd 20% to 63.40.

"The report suggests NOFHC (Non-operative Financial Holding Company) is not required in case there is no other business in the group. Accordingly, we see the possibility of a collapse in the holding company structure for Equitas, Ujjivan, IDFC First Bank (if IDFC sells the MF business), etc," domestic brokerage Motilal Oswal said in a note.

The RBI panel recommended that "Non-operative Financial Holding Company (NOFHC) should continue to be the preferred structure for all new licenses to be issued for universal banks. However, it should be mandatory only in cases where the individual promoters/promoting entities/ converting entities have other group entities."

"While banks licensed before 2013 may move to an NOFHC structure at their discretion, once the NOFHC structure attains a tax-neutral status, all banks licensed before 2013 shall move to the NOFHC structure within 5 years from announcement of tax-neutrality," it said.

The report has been placed on the RBI website for comments of stakeholders and members of the public. Comments on the report may be submitted by January 15, 2021 through email. RBI will examine the comments and suggestions before taking a view in the matter.

The RBI panel has also proposed that large corporates may be permitted to promote banks after necessary amendments to the Banking Regulations Act, as well as raising the cap on promoters' stake in private sector banks to 26 per cent. The panel also suggested the conversion of big non-banking finance companies (NBFCs) into banks.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, says that the new RBI rules on banking/ NBFCs are positive for the financial sector.

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