Larsen & Toubro has decided to shelve its plan to turn its financial services arm into a full-fledged bank with the Reserve Bank of India indicating that it was not willing to grant banking licences to large conglomerates.

“I don’t think the company is interested in a banking licence now. The minute we realised that the Reserve Bank is not very favourably disposed towards granting banking licences to large industrial groups which are incidentally large consumers of banking products and services. We are now in the mode of closing out all those businesses which would have helped had we become a bank,” said Shankar Raman, Whole Time-Director & Chief Financial Officer, Larsen & Toubro, to businessline.

Earlier, L&T was weighing the option of applying for a full-fledged banking licence and had even appointed an internal committee to study the opportunity.

Retail focus

Now, the company is focusing on retail business through its non-banking finance arm Larsen & Toubro Finance. In 2022, the company had announced plans to completely exit the wholesale and realty funding business of L&T Finance within two years.

“We are now focusing on being a very efficient retail product-focused digitally-enabled tech company. Retail loans both in the urban market and rural market are what L&T Finance will do and that can be done in a non-banking format. We do not have to necessarily become a bank,” added Raman. 

“We have had ambitions to take a banking licence for a long time. But we could not get it previously. There are good reasons to be in the NBFC space and there are pros and cons to becoming a full-fledged bank,” SN Subrahmanyan, CEO and Managing Director, L&T, told businessline in 2021.