The competition to grab new banking licences is becoming intense with two major corporate houses — L&T and the Birlas and a non-banking finance company Muthooot Finance Ltd (MFL) — throwing their hats in the ring to get new private bank licences.

Already IFCI, Bajaj Finserv, India Infoline, Religare Enterprises, JM Financial etc., have either applied or expressed their intention to apply for banking licence.

L&T Finance, Aditya Birla Nuvo

While L&T Finance Holdings Ltd’s board of directors has given the nod for the company entering the banking space, Aditya Birla Nuvo Ltd has submitted its application to RBI for the grant of banking licence. MFL’s promoters have expressed their intention to apply for banking licence and have got the board’s nod.

In a communication to the stock exchanges, L&T Finance Holdings said that its board has approved the company’s proposal to apply to RBI for a licence to set up a bank in accordance with the guidelines for new banks.

Aditya Birla Nuvo Ltd had submitted its application on June 28 to RBI for banking licence.

In a statement, the company said that Aditya Birla Finance Ltd, a wholly owned subsidiary of Aditya Birla Financial Services Pvt Ltd, the existing non-banking finance company, will be converted into a bank.

At present Aditya Birla Financial Services, a wholly owned subsidiary of the company, holds all entities involved in financial services with the exception of life insurance i.e. Birla Sun Life Insurance Company Ltd (BSLI), that is directly held by the company.

It was proposed that Aditya Birla Financial Services will be the non-operative financial holding company as stipulated in the RBI guidelines. It will be holding the entire financial services businesses. The transfer of Birla Sun Life under Aditya Birla Financial Services would be subject to regulatory approvals.

Muthoot Finance board

Muthoot Finance board was apprised of the decision of M.G. George Muthoot, Geolge Jacob Muthoot, George Thomas Muthoot and George Alexander Muthoot, promoters of the company, to apply for a banking licence to promote a bank which will be newly incorporated as a public company.

The board noted that if the promoters were granted an in-principle approval, the shareholding structure and business of the company will be required to be restructured in compliance with the guidelines within 18 months from the date of grant of in-principle approval. The board has given its nod to the proposal of the promoters.

All the three stocks have benefited from their intended foray into banking that has been in the air for quite some time.

L&T Finance Holdings witnessed a huge trading volume of 10.63 lakh shares in about 90 minutes of trading. But the stock price moved up by just Rs 2.10 to Rs 80.80.

Aditya Birla Nuvo gained Rs 11.85 to move up to Rs 1077.60 in the NSE. MFL gained Rs 5 to move to Rs 108. The stock has rebounded smartly after falling to a 52-week low of Rs 87.20 on June 26.

(This article was published on July 1, 2013)
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