Discussion paper commended

Finance companies say they are relieved at the capital requirement proposed for a new banking licence in the discussion paper put up by the Reserve Bank of India (RBI) on Wednesday.

It suggested a minimum requirement above Rs 300 crore. RBI has also discussed relevant issues such as minimum and maximum caps on promoter shareholding and foreign shareholding in new banks. Plus, the option of converting non-banking finance companies into banks and the issues in giving licences to industrial and business houses.

The suggested capital requirement is above Rs 300 crore or an initial Rs 500 crore to be raised to Rs 1,000 crore within five years, and also above Rs 1,000 crore. Companies have started working on responses, to be sent by September 30. Following this, RBI will issue a draft set of guidelines.

Company executives in general commended the discussion paper and said RBI had very clearly expressed that only serious players were to get a banking licence.

Industry experts said the housing finance arm of Life Insurance Corporation (LIC) had a fair chance of getting a licence. Its chief seemed to think so, too.

“Prima facie, there seems to be no issue as far as LIC Housing Finance is concerned. If we are eligible for a licence in the final guidelines, we will definitely apply for one,” said R R Nair, Director and Chief Executive.

“The central bank has identified the right issues and analysed the experience of the Indian banking system. We are interested for an entry but our motivation is somewhat distant at the moment,” said Arun Duggal, Chairman, Shriram Capital. Senior executives at Bajaj Finserv also expressed interest.

“Things will move in a positive direction, as the document has covered almost all key aspects. We will be sending in our reactions,” said Nirmal Jain, chairman, India Infoline.