Sir — This refers to the report that the Reserve Bank of India has granted banking licences to IDFC and Bandhan, leaving out the corporate houses.
After a long gap of 10 years, the RBI has granted in-principle licence to new firms. One of the beneficaries is the largest micro-finance player in the country and the other is the largest infrastructure finance player. Some may call this a conservative move by the RBI, as many hot favourites like l&T Finance and others seem to have missed the bus. But the RBI’s decision is justified given the present state of affairs, when it’s better to be cautious.
The RBI has also categorically said that licences from now onwards would be on the tap. So these corporate houses can again review and re-assess their position and re-apply. What is going to be critical is how the two selected organisations will be able to meet the stringent requirements of the RBI, like opening 25 per cent of their branches in rural areas and meeting priority sector lending and statutory liquidity ratios.
In all probability, these new banks might not reach the break-even point for the first few years, let alone make profits for investors and shareholders. IDFC and Bandhan have just crossed the first hurdle; bigger ones await them.