Srei is among those corporate and NBFCs including L&T Finance, Shriram Group, Mahindra Finance and Reliance Capital that are seeking to set up banks. RBI last week had released the final guidelines for issuing of new banking licences, allowing entities in private and the public sector as well as NBFCs to enter the fray.
Hemant Kanoria, the chairman & managing director of Srei Infrastructure Finance, told FE the company hopes to leverage on the NBFCs rural presence to build the bank. We currently have 28,000 rural centres manned by village entrepreneurs. Some of these can be converted into bank branches, said Kanoria.
Through these rural centres Srei currently offers a range of services like e-governance, insurance and mutual fund distribution, and banking correspondent services. In last 5-6 years, we have invested around R300 crore to build up our rural network.
Apart from rural centres, Srei has about 100 offices in urban areas. SREI Infrastructure Finances businesses include infrastructure equipment leasing and finance, infrastructure project finance, advisory and development, insurance broking, venture capital, etc. Srei also runs a joint venture with BNP Paribas Lease Group for equipment financing.
Kanoria said Srei has been in financial sector for 24 years lending to sectors like mining, construction and agriculture. Thus, we feel moving into banking is a natural progression for us. Also in view of RBIs prerogative of financial inclusion, we have a good business model owing to our focus on rural banking, he said.
Kanoria, however, added it is not easy to set up operations in rural areas. It is like counting pennies. The cost of setting up infrastructure in unbanked areas is high, he said. RBIs guidelines say new banks will have to set up 25% of its branches in unbanked rural areas.
Kanoria said Srei should be able to raise the R500-crore equity capital required to start the new bank. Our financial services entities have a net worth of R4,800 crore and our loan book stands at R32,000 crore. Raising funds should not be a trouble.
He added Srei has an in-house team of consultants led by ex-bankers as well as external consultants who are advising them. We will submit our license application as soon as possible, he said. RBI has given a deadline of July 1 for making the applications.
Despite the NBFCs large infrastructure equipment and project lending heritage, Kanoria said the bank will be aggressive on retail business. Of course, the two financial services entities will have to be merged with the bank. But we will have a large focus on the retail banking if we get the licence, said Kanoria. The bank could raise funds both through wholesale and retail channels, he added.
Srei, however, is still working out the modalities of the holding company structure. RBI norms state that NBFCs shall be eligible to set up a bank only through a wholly-owned non-operative financial holding company.