NBFCs gear up for bank licences

Written by Shashidhar KJ | Mumbai | Updated: Mar 1 2014, 05:30am hrs
Banking licence aspirants have been stepping up their last-lap efforts to comply with RBI norms.

On Tuesday, a committee headed by former RBI governor Bimal Jalan submitted its shortlist of companies for the apex bank to consider. While some marquee names, such as Tata Sons and Mahindra and Mahindra, opted out of the race for a bank licence to protect their successful NBFCs, others are ironing out issues, which might hurt their chances for a licence.

IDFC in December had said it is seeking approval from shareholders to reduce foreign shareholding in the company from the existing 54% to 49.9% to comply with the RBIs norms. IDFCs foreign institutional investor (FII) holding stood at 51.39% at the end of December 2013.

We have 18 months to be compliant with the guidelines laid out by RBI and we will meet the foreign shareholding requirement within that time-frame, an IDFC spokesman said in an email.

Other companies such as India Infoline Finance (IIFL) also said that they would comply with RBI norms if they had to reduce FII holding in the company. FII holding is below 50% and meeting the RBI norms. If required, we will bring it down further, said IIFL managing director R Venkataraman.

Banking licence hopeful Bandhan Micro Finance has been beefing up its capital reserves. The micro-finance institution (MFI) earlier this week raised capital worth Rs 260 crore to strengthen its Tier-II capital. The company raised Rs 160 crore from the International Finance Corporation (IFC) for a period of seven years and another Rs 100 crore in the form of debentures from a Geneva-based company, said Bandhan chairman and managing director Chandra Shekhar Ghosh.

We already have capital reserves worth Rs 1,100 crore, which is more than the minimum R500 crore specified by the RBI. This new capital we have raised will help show our strength and means of other sources of funding. And we hope this will help secure a banking licence, Ghosh added.

However, some applicants, such as Aditya Birla Nuovo owned by the Aditya Birla group, may see their chances of licence reduced, as sources in the finance ministry told media that companies under investigation by the Central Bureau of Investigation (CBI) will not be able to get a licence. Currently, the CBI is investigating the groups chairman in a case related to alleged irregularities of coal mining rights.

Other applicants, such as Shriram Capital, indicated they will consider taking up the bank licence only if their flagship NBFC, Shriram Transport Finance Company (STFC), is kept out of their bank set-up. The RBI guidelines say that the non-operating holding company cannot hold a separate NBFC with businesses that fall under the banking ambit.

Shriram Capital has applied for a banking licence. Shriram Transport will remain as an NBFC, Umesh Revankar, managing director at STFC told FE. Since we are going to remain an NBFC we are not looking at the needs of a banking licence, he added.