New law arms RBI with more powers to regulate banks
A host of well diversified non-banking financial companies (NBFCs) are keen to become banks and will throw their hats in the ring once the Reserve Bank of India (RBI) invites applications. Larsen and Toubro?s subsidiary, L&T Finance is among the several aspirants for a banking licence.
?With deposits and other banking services, we shall get to interact with all customers on both the assets and liabilities fronts. It will increase business opportunities and help diversify our sources of funds,? said N Sivaraman, the president and wholetime director of L&T Finance Holdings.
Others keen on setting up a bank are the Aditya Birla Group, the Bajaj Group, Edelweiss and the Shriram Group. Ajay Srinivasan, chief executive, financial services, Aditya Birla Group, said: ?With over 1,700 points of presence and an assets under management (AUM) base of over R1,00,000 crore, we believe banking is a natural fit with our business. However, we would have to take a decision once we have an opportunity to review the final guidelines.?
Umesh Revankar, the managing director, Shriram Transport Finance Corp (STFC) believes that there is little scope for converting STFC into a bank. However, the Shriram Group could explore the option of setting up a bank as a separate entity.
With the Banking (Laws) Amendments Bill passed in Lok Sabha on Tuesday and expected to be discussed in the Rajya Sabha on Thursday, the Reserve Bank of India is now armed with more powers to regulate banks and may announce final guidelines on new banking licences in a few months. In the draft guideline, RBI said groups that derive 10% or more of income or assets from broking or real estate cannot promote banks.
Moreover, RBI has laid down that promoters will be permitted to set up a new bank only through a wholly-owned non-operative holding company (NOHC), which will hold the bank as well as all the other financial services companies regulated by RBI or other financial sector regulators.If a promoter group already has an existing NBFC in a group which is involved in an activity that banks can undertake, the activities undertaken by the NBFC will have to be transferred to the new bank, or the NBFC will have to convert itself into a bank.
