According to consultants working on some applications, many potential applicants are also waiting for the Reserve Bank of India (RBI) to release a list of frequently asked questions/clarifications after receiving questions from aspirants received till April 10. Those planning a banking foray include corporate groups such as Reliance, Tata, Bajaj, Videocon, Aditya Birla, and Mahindra & Mahindra, the Manipal Group, public sector India Post and Power Finance Corporation, micro finance institutions including SKS Microfinance, Bandhan Financial Services and Janalakshmi Financial Services, broking firms such as Edelweiss Financial Services and India Infoline, as well as non-banking finance companies such as LIC Housing Finance, SREI Infrastructure Finance, L&T Financial Holdings, Religare Enterprises, Shriram Transport Finance and Magma Fincorp. The latest to show interest is JM Financial, with help from former Citigroup CEO Vikram Pandit, who took a stake in the company.
The conditions many are finding tough to comply include the one making it mandatory to open at least 25% of branches in unbanked rural centres (population up to 9,999) and help in financial inclusion in the country, where around half the population is still unbanked.
They also said it will not be easy for the aspirants to build their priority sector lending portfolio from the commencement of its operations and comply with the priority sector lending targets and sub-targets as applicable to the existing domestic banks. Any fine for failing to meet these targets would hit their bottom line during the starting period, they added.
A stock exchange listing within three years of business commencement will also be difficult, they said, adding the non-operative financial holding company (NOFHC) reducing the holding from 40% of the paid-up voting equity capital of the bank during the initial five years to 15% within 12 years also takes away the incentives for the promoters to reap the benefits of their hard work.
Besides, many including existing NBFCs looking at converting themselves into banks are working on restructuring their group by merging and demerging their existing structures to comply with the NOFHC structure, which has tax and capital implications and a huge cost of compliance. Many are realising that the entry barriers are very high and the rules are very strict. In the end, only serious players with a strong balance sheet and deep pockets will remain in the fray, a consultant said.