Mahindra & Mahindra Financial Services eyes universal bank licence

Says guidelines for new banks in private sector did not provide any flexibility for NBFCs in 2013

Mahindra & Mahindra Financial Services — one of the strongest contenders for a banking licence last year, which later on pulled out of the race — is now eyeing a universal bank licence, whose final guidelines are expected to be announced shortly.

“Our level of interest in a universal bank licence continues, except for the fact that we would like to review the regulatory framework under which the licences are being offered, so that it looks commercially viable and it is becomes administratively doable,” said Ramesh Iyer, managing director of the non-banking financial company (NBFC).

In 2013, the NBFC had decided to drop its plans for a banking licence because it found the guidelines for new banks in the private sector did not provide any flexibility for NBFCs and banks to co-exist for a reasonable period of time.

“We would prefer that when we move into a banking platform, how to convert our 1,200 branches into bank branches. I would think not even a single branch of ours will be currently like a bank because it is an NBFC. But from these 1,200 branches, we are doing business. I would not like to give up business in many locations just because we can't convert them to be a bank,” said Iyer.

Tech Mahindra, another Mahindra & Mahindra Group company, has bid for a payments bank licence.

The objective of setting up of payments bank is to further financial inclusion by providing small savings accounts and payments/remittance services to migrant labour workforce, low-income households, small businesses, other unorganised sector entities, and other users.

“If Tech Mahindra has a payments bank, then we may want to participate in moving the money through that system. We can be a strong partner at the rural level. As a group, we look at synergy between different businesses and different functions as much as we can,” said Iyer.

The NBFC had posted a 14 per cent decline in consolidated net profit at Rs 157 crore in the quarter ended December 31, 2014 owing to higher loan provisions and write-offs.

“There are some positive trends, and in a couple of months, if the monsoon turns out to be above average, then a lot of positive sentiments will return to the rural markets. My estimate is between September and beyond, one can start seeing growth,” Iyer added.