'RBI clarification on new bank licence looking positive'

Shriram Group studying RBI clarification

With the RBI coming out with its clarifications on Monday on the new bank licences, the Chennai-based Rs 60,000 crore Shriram Group has said some of the clarifications are looking positive and one has to study the complexities involved.

Speaking to Business Standard, G S Sundararajan, Group Director, Shriram Group, said, “The RBI has made its position clear. Some of them (RBI’s clarifications) are looking positive. We will discuss internally in the next three-four days and then see how we can fit ourselves into the framework.”

He added that the larger an NBFC, greater the complexities on converting business into the bank.

According to Sundararajan as per the new norms, the company requires a non-operating financial holding company, and hence it is working to modify the structure. It may be noted that the group chose Sundararajan to head the banking initiative and he has over 25 years of experience in financial services, including Citibank in India and the Temasek subsidiary in India.

The group, which wanted to set up a retail and SME Bank, wanted to be the Wells Fargo of India and the model will be similar to the latter’s where they have a mini branch which has proved itself to be a sustainable one. These branches do not have teller windows, safe-deposit boxes or bankers sitting in offices. Instead, bank employees will walk around with computer tablets fastened to their hands, and the branch’s walls will fold in at night so that only the automated teller machines are exposed to customers.

Sundararajan said, “I think the clarifications are reasonably comprehensive and very detailed. RBI made its stance clear both in terms of structure as well as in terms of the business model.”

Internally, we need to discuss how much of a drastic change needs to be done? Whether the structural changes will have negative impact on the existing well-run businesses like transport and SME finance.

He noted, as far as the structure is concerned even in the original guidelines it was clear the group need to have a non operating financial holding company, which the group was quite clear about.

“We are working towards it. We have got much more clarification on the nuances of that. We need to study that closely and understand how we can modify our structure accordingly,” said Sundararajan.