Banking licence to help cut R-Cap's debt by Rs 15,000 cr: Anil Ambani

Reliance Capital is one of 26 applicants for new banking licences

Reliance Capital (R-Cap), part of the Reliance Group, was hopeful of reducing its debt by Rs 15,000 crore to Rs 5,000 crore if it secured a banking licence, Reliance Group Chairman Anil Ambani said on Tuesday.

“Apart from the long-term growth potential of the proposed bank as a profitable institution in itself, the immediate benefit to your company will be the reduction in our consolidated debt from about Rs 20,000 crore to Rs 5,000 crore, upon transfer of our commercial finance business to the proposed bank,” Ambani told shareholders.

R-Cap is one of the 26 applicants for new banking licences. It has sold about five per cent stake each to Japanese bank Sumitomo Mitsui Trust Bank and Nippon Life Insurance. Nippon Life has already acquired 26 per cent stake in Reliance Life Insurance, a Reliance Capital subsidiary.

Existing non-banking financial company Reliance Commercial Finance would be converted into a bank, according to Reserve Bank of India guidelines, Ambani said, expressing confidence R-Cap would be the one of the first applicants to secure a banking licence. “Currently, we have no plans to make a capital call or ask you for money to invest in the bank, as your company is adequately capitalised. However, at the end of three years, we intend to list the proposed bank, according to existing guidelines,” he told shareholders. He said

R-Cap would remain a listed entity and currently, there was no plan to list any of the subsidiaries.

He said new banking licences were expected to be awarded in 2014, and the company was constantly in touch with the central bank to ensure all queries were answered.

“We welcome Irda (Insurance Regulatory and Development Authority)’s new regulations encouraging banks to become brokers and not remain just corporate agents,” he said. Ambani said this would benefit hundreds of millions of customers, providing them a wider choice of products from several life companies of each bank. “This change will also widen the distribution and reach of all players, especially new entrants such as Reliance Life Insurance, and lead to our accelerated growth across the country,” he said.