Tata Sons, Aditya Birla Nuvo, Reliance Capital, Bajaj Finserv, L&T Financial Holdings, IFCI and India Post led the 26 private and public sector entities that have applied to the Reserve Bank of India to set up banks.

Besides the corporate titans, the applicants include two microfinance institutions (MFIs), two housing finance companies, two infrastructure finance firms, a gold loan company, a remittance outfit, and Venugopal Dhoot-promoted Value Industries.

The Department of Posts and IFCI have also thrown their hats into the ring.

In the run-up to applying, many of the firms tried to get a few things right to get the regulator to consider their case favourably.

Some firms roped in foreign partners. Reliance Capital has taken on board Sumitomo Mitsui Trust Bank and Nippon Life Insurance as minority partners, while the Religare Enterprise promoters divested a stake in favour of US-based Customers Bancorp. Further, a few firms hired ex bank honchos — M. D. Mallya (former Bank of Baroda chief) is an advisor to Tata Capital, and V. K. Chopra (former Corporation Bank chief) heads India Infoline Finance Ltd — to bolster their case for a licence.

Though 26 entities have applied for a licence, the RBI may not allow more than three-four entities to set up banks.

Tough task

With top-notch firms in the fray, the RBI's task of zeroing in on the right candidates for bank licences becomes that much tougher.

G. S. Sundararajan, Director, Shriram Group, said, “Given our track record over the last three decades in promoting financial inclusion, we are keen to continue our inclusive growth story on a banking platform.”

As per the RBI’s guidelines for licensing of new banks in the private sector, entities/groups in the private sector, entities in public sector, and non-banking financial companies (NBFCs) are eligible to set up a bank through a wholly-owned non-operative financial holding company.

The initial minimum paid-up voting equity capital for a bank is Rs 500 crore. The holding company will initially hold a minimum of 40 per cent of the paid-up voting equity capital of the bank, which will be locked in for five years. This voting equity capital has to be brought down to 15 per cent within 12 years.

New banks, which are required to achieve the Government and the central bank’s financial inclusion goals, have to get their shares listed on stock exchanges within three years of commencement of business.


(This article was published on July 1, 2013)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.