Reliance Capital, which applied for a banking licence in June, is adequately capitalised for the next three years, Chairman Anil Ambani told shareholders at the company’s annual general meeting (AGM) here.

He said the immediate benefit of bagging a licence would be a reduction in the debt of the company.

“Apart from the long-term growth potential of the proposed bank as a profitable institution in itself, the immediate benefit to your company will be the reduction in our consolidated debt from approximately Rs 20,000 crore to Rs 5,000 crore, upon transfer of our commercial finance business to the proposed bank. “This will improve our debt / equity ratio to a most conservative 0.5:1,” said a company statement quoting Ambani.

He also said that there were no plans to make a capital call on shareholders for providing initial capital for the proposed bank.

Reliance Capital plans to focus on five major businesses — life insurance, general insurance, health insurance, asset management and banking — for its future growth.

Ambani also welcomed the Insurance Regulatory and Development Authority’s new guidelines that allow banks to be licensed insurance brokers.

“Such a transition will benefit hundreds of millions of customers, by providing them a wider choice of products from several life companies from each bank. This change will also widen distribution and reach for all players, especially newer entrants such as Reliance Life Insurance,” Ambani said.

The shares of Reliance Capital ended 4.76 per cent lower at Rs 299.80 on the Bombay Stock Exchange.

(This article was published on August 27, 2013)
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