Non-banking financial companies (NBFCs) are hopeful of setting up banks with the Reserve Bank of India (RBI) making it clear that companies primarily involved in finance business will make the cut for bank licence.
“The new draft is quite favourable for NBFCs. We will definitely apply under this new scheme of banking licence.We have the infrastructure with 5,000 branches and all India presence,” said George Alexander Muthoot, Managing Director, Muthoot Finance — an NBFC primarily into gold loans. The gold loan portfolio of the company is about around Rs. 25,000 crore. Muthoot Finance had applied for a bank licence in 2013 but was unable to secure one. RBI had granted licences only to two entities, Bandhan Financial Services and IDFC.
Track recordThe central bank said existing NBFCs that have a successful track record for at least 10 years will be eligible to convert into or promote a new bank.
But analysts said NBFCs may not be in a hurry to become a bank as they would wait to see how the two new banks are faring. “An open licensing regime should result in a balanced approach to applying for a bank licence and many NBFCs may want to wait on the sidelines till they understand the merits of the transition from the two banks that got their licences,” according to a Kotak Securities note to its clients.
While many NBFCs are upbeat, for entities promoted by large corporate houses like Reliance, L&T and Aditya Birla, getting a licence would not be easy given the stringent norms.
Eligibility criteria“Groups in the private sector that are ‘owned and controlled by residents’ and have a successful track record for at least 10 years, provided that if such a group has total assets of Rs.5,000 crore or more, the non-financial business of the group does not account for 40 per cent or more in terms of total assets in terms of gross income,” the RBI had said regarding eligibility of the promoters.
