LIC Housing Finance to apply for bank licence

LIC Housing Finance, the home-loan arm of Life Insurance Corporation of India, has decided to apply for a banking licence. LIC HFL's board has cleared a proposal in this regard.

“We have decided to go ahead with the application, but other modalities like setting up a non-operative financial company (NOFHC) are still being discussed,” V K Sharma, managing director and CEO of LIC HFL told Business Standard. “There is a separate committee looking into those matters.” After the Reserve Bank of India (RBI) had issued final norms for bank licence applications in February, LIC’s then chairman, D K Mehrotra, had told Business Standard that it had asked LIC HFL to look into the guidelines and, if found favourable, the company would move ahead.

Yesterday, the board of Tourism Finance Corporation of India (TFCI) —another public sector finance institution — which has IFCI as the largest shareholder, had approved the decision to apply for the licence. Other prospective applicants for the bank licence are Shriram Group, Religare Enterprises, IDFC and Bajaj Finance, to name a few.  

The last date to apply for the licence is July 1. This is for the first time in nearly a decade that the central bank is issuing new banking licences.

Since the main purpose of issuing these is to boost financial inclusion, RBI has mandated new entrants to have a compulsory 25 per cent of branches in un-banked rural centres.

New banks will also have to adhere to priority-sector lending norms since inception.