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BW Businessworld

Tata, Ambani, Birla In Race For Bank Licence

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Tata Sons, India's biggest business group, and firms controlled by billionaires Anil Ambani and Kumar Mangalam Birla are among the 26 companies that have applied for a licence to open banks. Ambani's Reliance Capital has applied for a banking licence along with Japan's biggest life insurer Nippon Life Insurance Co and Sumitomo Mitsui Trust Holdings Inc. Former Citigroup Inc chief executive Vikram Pandit has teamed up with JM Financial Ltd.

Among public sector entities, India Post and IFCI also submitted applications for bank licence while micro finance institutions like Bandhan Financial Services, Janalakshmi Financial Services too expressed their intention to set up a bank. "The Reserve Bank of India in all received 26 applications," the central bank said after the deadline for applying for a bank licence expired on Monday.

The RBI had issued guidelines for 'Licensing of New Banks in the Private Sector' on February 22 and came out with clarifications in the first week of June. It is, however, not yet clear how many new bank licences will be issued. Allowing corporate houses to set up banks is part of an effort to expand access to financial services in a country where only about half the population has a bank account. Licence winners are expected to be announced by the first quarter of 2014.

RBI Governor D Subbarao had earlier said that "our effort will be to make that judgement as transparent as objective as contestable as possible...I want to say that not everybody who is fit and proper will be given a (bank) licence because we expect the number of eligible applicants will be much larger than what is meaningful number of licences we can give".

In its clarification, the RBI had said the entities getting licences to open new banks will be given 18 months to open branches, and promoters would have to transfer their holdings to the non-operative financial holding company (NOFHC) in a stipulated period.

Here's a list of companies that have said they would or had applied:
  • Aditya Birla Nuvo, part of the Aditya Birla conglomerate, which includes Idea Cellular and Hindalco Industries.
  • Bajaj Finance, part of the Bajaj Group, which includes motorbike maker Bajaj Auto.
  • Edelweiss Financial Services.
  • IDFC, a finance company which lends to the infrastructure sector and has investment banking, private equity, research and mutual fund operations.
  • India Post, part of the ministry of communications and information technology. Indian post offices offer savings schemes and sell insurance and mutual funds.
  • India Infoline, part of the IIFL group, which has interests in brokerage, wealth management, insurance and consumer loans.
  • JM Financial. Former Citigroup CEO Vikram Pandit would become non-executive chairman of JM's banking arm if it wins a license.
  • L&T Finance Holdings, part of India's largest engineering conglomerate, Larsen & Toubro.
  • LIC Housing Finance, a unit of Life Insurance Corp of India, the country's largest insurer.
  • Magma Fincorp, a finance company that gives loans for vehicles, gold and small enterprises.
  • Muthoot Finance gives loans against gold.
  • Reliance Capital, controlled by billionaire Anil Ambani. Japan's Sumitomo Mitsui Trust Bank and Nippon Life Insurance of Japan would each own stakes of between 4 and 5 per cent in the proposed bank.
  • Religare Enterprises, a financial services firm controlled by the Singh brothers who also control Fortis Healthcare. US-based bank Customers Bancorp Inc will invest $51 million in the bank if the group gets a licence.
  • Shriram Capital, part of the Shriram Group, which includes truck financier Shriram Transport.
  • SREI Infrastructure Finance Ltd, which mainly finances infrastructure projects.
  • UAE Exchange India, a remittance and foreign exchange services firm.
  • Videocon Industries, which has interests ranging from white goods to oil fields.

Not In The Fray
* Mahindra & Mahindra Financial Services, part of the Mahindra Group that includes India's biggest utility vehicle maker, was seen as a strong contender for licence but opted not to apply.
* SKS Microfinance<SKSM.NS>, India's only listed micro finance company, did not apply. Earlier this year, its chief financial officer said it would consider applying.