The initial reaction to the guidelines for licensing of new banks in the private sector ranged from cautious optimism to a jubilant welcome. Some of the aspirants also confirmed their plans to seek a licence.
Stating that the central bank had comprehensively dealt with the issue, Indian Overseas Bank (IOB) Chairman and Managing Director M. Narendra expressed a hope that the guidelines would help improve financial inclusion and facilitate entry of serious players. They were expected to benefit those interested in “playing a long-term role,” and for whom the licence would provide synergy with the existing line of business.
The new banks, he added, would have a better module to reach out to customers and improve the efficiency levels in the industry. “They will have the right model, technology [from the beginning]… something that public sector banks are also adopting.”
Karur Vysya Bank Managing Director and Chief Executive Officer K. Venkataraman said there was no unfair advantage for the new banks as the RBI had retained the same norms with regard to rural branches and priority sector lending targets. “Everything depends on the business models of the new banks… it would matter most in a competitive scenario… we have to keep a watch.”
KPMG Partner and head of Financial Services Tax Naresh Makhijani said the guidelines were now complete in all respects. The RBI was eying entities with deep pockets, impeccable track record and financial inclusion in mind.
Welcoming the guidelines, financial services company Religare said banking was a logical extension of Religare’s diverse India financial services platform and it would apply for a licence. A company spokesperson said it was fully qualified as per the norms announced by the RBI.
Reliance Capital CEO Sam Ghosh said his company welcomed the new guidelines and would apply for a licence. Mahindra and Mahindra Financial Services Managing Director Ramesh Iyer said the company was interested and take a final decision in a week or so. IndiaBulls Group Director Ajit Mittal said: “We have an open mind… will take a view. The board will decide in due course of time. He said the group is eligible to get a licence as per the guidelines.
Describing it as a “game changing event,” Angel Broking Chairman and Managing Director Dinesh Thakkar said: “I would expect at least 8-10 very serious players with very deep pockets to enter the sector. Clearly, looking at strong ROEs of existing private banks, there is good pricing power in the sector, indicating the need for more competition. With this move finally, competition will increase and in my view in the medium-term, it is ultimately the PSU banks that are likely to be on the losing side of the market share dynamics.”