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Shriram Group Interested In Securing Small Bank Licence

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Chennai-based Shriram Group, which failed to secure a banking licence in the recent round of licencing, has not given up the hope and is now looking at applying for a small bank licence.

The Reserve Bank had in July issued the draft guidelines for licencing of small banks and payment banks.

"The draft guidelines for small banks have been issued and we have given our suggestions and asked for some clarifications.

"Once the RBI comes out with the final guidelines and if we know that there is an opportunity for us then we will definitely apply for it," Shriram Group director G S Sundarajan told PTI.

He said that the group wants to get into banking space as it would fill up the gap it has in terms of product offerings.

In the last round of banking licencing, as many as 25 corporates, including Aditya Birla Nuvo, Bajaj Finserv, Reliance Capital, LIC Housing Finance, L&T Finance and Shriram Capital, among others had applied.

The RBI, however, gave in-principle approval only to infrastructure financing firm IDFC and micro-lender Bandhan.

Sundarajan said his group will apply for a small bank licence only if the regulations do not affect its existing businesses.

"If we have to convert our existing NBFCs (Non-banking financial company) into the bank then we may not be interested... we will remain an NBFC only," he said.

In the previous round of granting banking licence, Shriram Capital had showed its discomfort over the regulation which insisted on merging of Shriram Transport Finance Corporation and Shriram City Union into the bank if a licence were to be issued.

"We had applied with a very clear condition that we will not transfer any of our existing businesses into the bank and it was not adhering to the guidelines, and therefore we were not considered," Sundarajan said.

It can be noted that Tata Capital and Mahindra Finance also withdrew their application halfway expressing their disinclination to merge their existing NBFC businesses.

He said the company has also sought clarification on weather a small bank will be allowed to be operated in a few districts or in a state.

"The guidelines say you will have to start in a few districts, which is again not interesting to us as it will take us ages to become profitable," he said.

According to the draft guidelines, the area of operations of the small bank will normally be restricted to contiguous districts in a homogeneous cluster of states or union territories so that the bank has the local feel and culture.

However, if considered necessary, the bank will be allowed to expand its area of operations beyond contiguous districts in one or more states with reasonable geographical proximity, the guidelines stated.

"If they even give us one state then it will definitely help us to establish our presence there," Sundarajan added.

He said the group will also be looking at applying for wholesale consumer banking licence as and when it comes.

"If that (wholesale consumer banking) is more pan-India than the small bank then we may opt for that. We are keeping all our options open but our interest in being a bank without impacting the existing businesses is still very high," Sundarajan said.