Confused by RBI's lack of guidelines for new banking licences despite the announcements of licences on-tap, NBFCs like the ShriramGroup has said that it will only apply for standalone banking licence and was not keen to convert its NBFC into a bank.
"We are not keen to convert our NBFC into a bank but will apply for licence for an independent bank. May be like a small bank licence,"Umesh Ravenker MD & CEO Shriram Capitals told The Pioneer. As per RBI guidelines, NBFC wll have to convert into bank once its gets licence. The Group has been saying that it doesnot want to lose its large customer base which is associated with its NBFCs.
The Shriram Group - which is known by its holding company ShriramCapital -- had earlier applied for banking licence in first round wherein 25 corportes,NBFCs and MFIs had applied for differentiatedbanking licence. But by April the RBI had granted licence to only two entities.
It may be recalled that the RBI had laid special stress and was keen on giving priority to those entities, who had background in running financial outfit or were NBFCs to grant banking licences. The Shriram Group has two NBFCs under it. Both NBFC collectively have assets under management (AUM) of about Rs 65,000 crore.
Sources said that the Shriram Group's NBFC's poses a significant challenge of conversion.It has highAUM and large number of employees, who have been doing NBFC businesses which are some major challenges which group will have to face. The group has also to decide on the structure of the business under Non Operative Financial Holding Company (NOFHC) as required by RBI.
In April, RBI had issued in-principle approval for IDFC ltd and Bandhan Financial Services Pvt. ltd to set up commercial banks. A total of two dozen entities were in the race for new banking licences.These included Reliance Capital ltd, Bajaj Finserv ltd, Shriram Group, Aditya Birla Nuvo ltd, l&T Finance Holdings ltd, lIC Housing Financeltd, Muthoot Finance ltd and India Post. From these, two parties hadalready exited the race. IndiaPost could be considered to startoperations as a payment bank.
RBI Governor Raghuram Rajan has indicated that the central bank would start the process of issuing banking licences soon on tap. The apex bank will also issue licences on a continuous basis to qualifiedaspirants instead of opening the licensing window after longintervals, as per Rajan. However, the Government is yet to come out with the draft guidelines on differentiated banking which the Department of Financial Services has said would be done as soon as possible as many of the rejected aspirants for the banking licenceswere keen to apply for payment or differentiated banks licences.
RBI is keen on promoting differentiated banking in India like payment banking and enhance its financial inclusion targets in the non banked rural areas of the country. Towards this, RBI has set up a Nachiket Mor commitee which has recommnded that smaller financial NBFCs can start operations even wil small capital of Rs 50 crore to startpayment banks.The RBI had later modified the limit to Rs 100 croreonly.
The Mor committee had also recommended permitting existing banks to create subsidiaries to operate payments banks. later, Mor had clarified that payments banks may be created by converting prepaid payment issuers (PPIs). These companies provide cards that customers can use to make payments with the money stored in them. The entry of small banks is also see as a step closer to moving towards adifferentiated banking licence regime. However, these facilities have to go through the monitoring of NPCI which is the final authority ongranting the clearance to these payment gateways in India.