Banking licence: RCap, Magma Fincorp throw hats in the ring

Final date for applications is Monday and RBI has specified Rs 500 cr as the minimum capital requirement to start a bank

Anil Ambani group's Reliance Capital (RCap) announced on Wednesday it would apply for one of the new banking licences.

It has also brought in Japanese investors, by agreeing to sell four to five per cent stake each to Sumitomo Mitsui Trust Bank (one of the largest in Japan) and Nippon Life Insurance. Nippon Life had 26 per cent stake in Reliance Life Insurance and in Reliance Capital Asset Management, the mutual fund and asset management arm of RCap.

RCap is the holding company for the group's businesses in asset management, life and general insurance, commercial and home finance and stock broking, among others. The final date for applications is Monday and the Reserve Bank of India has specified Rs 500 crore as the minimum capital requirement to start a bank.

Magma Fincorp said on Wednesday it had got its board of directors' approval to apply. It is an asset financing company which also provides gold loan and loans to small and medium enterprises. As of March, it had assets under management of about Rs 18,000 crore. Its net profit for 2012-13 was Rs 145 crore.

The Aditya Birla Group and Videocon Industries have also said they'd be applying. Others in the process of getting nod are the NBFC arm of Larsen & Toubro and the Tata Group's Tata Capital.

The Mahindra & Mahindra group had decided to stay out. Other NBFCs applying are IDFC and Religare Enterprises.

Unlike NBFCs, banks have to comply with cash reserve ratio and statutory liquidity ratio requirements. The new ones would have to do so from the outset.