Reliance Capital's banking plan gets a Japanese touch

Reliance Capital, the non-banking financial arm of Anil Ambani group, will once again try its luck for a bank licence.

In a statement on Monday, the group said it would participate in the financial inclusion mission of the Narendra Modi government by setting up Reliance Bank.

After setting up the bank, it would cater to individual customers and small, mid-size enterprises through its parent group’s network.

Reliance has also said Nippon Life Insurance (NLI) will also participate in the proposed bank by picking up equity stake in the venture. NLI has already picked up 26 per cent stake in Reliance's life insurance and asset management businesses.

“Reliance Capital is planning to set up its own bank, which will cater to individual customers and small and medium enterprises all over India. NLI is also participating in the bank project as part of strategic business alliance with a view to improve the financial infrastructure and contribute towards economic growth of India,” said Yoshinobu Tsutsui, president, NLI.

However, it is not clear if Reliance Capital will be interested in a universal bank or a differentiated bank licence. The recent licences that were awarded by the central bank was universal licences. The banking regulator has recently released draft norms for small banks and payment banks — that will focus on a niche segment. The capital requirement for these entities is Rs 100 crore as compared to Rs 500 crore mandated for universal banks. More niche banking activities are likely to be allowed like wholesale banks, infrastructure banks, among others.

In June 2013, after Reliance Capital applied for universal bank licence, the company had said that Sumitomo Mitsui Trust Bank, one of the largest banks of Japan and NLI propose to take between four-five per cent stake each in its proposed venture.

In a joint statement issued by Tsutsui and Amitabh Jhunjhunwala, group managing director, Reliance Group, on the occasion of Prime Minister Narendra Modi's visit to Japan, said in India, the demand for bank loans is increasing and bank deposits are rapidly getting popular based on the needs for the infrastructure brought by the economic growth and the rise of the middle class.

“The government, through the finance ministry and the RBI, proposes to issue guidelines that will allow private corporations to establish various kind of banks so that the spread of the fundamental financial services in rural areas, through the financial inclusion mission, can be achieved,” said the statement.

Further, Nissay Asset Management (NAM), a part of NLI, and Reliance Capital Asset Management (RCAM) have launched two mutual funds - Short Term Indian Bond Fund and India Equity Selection Fund - for the Japanese retail investors.

“The launch of these funds is part of our larger initiative to strengthen the partnership between the two corporations and two countries. These funds will use the collective expertise of our fund managers to help Japanese and Indian investors invest and gain from growth potential in our countries,” said Sundeep Sikka, CEO, RCAM.

BANKING STORY NOT OVER YET?

• Reliance Capital — the NBFC arm of the Anil Ambani group — will once again try its luck for a bank licence
   
• Earlier this year, it failed to get a licence for universal banking when the RBI awarded licences to only IDFC and Bandhan, out of 25 applicants
   
• The entity says it will participate in the financial inclusion mission of the govt by setting up of a Reliance Bank
   
• The group says Nippon Life  Insurance will also participate in the proposed bank by picking up equity stake in the venture
   
• However, it is not clear if Reliance Capital will be interested in a universal bank or a differentiated bank licence
  

 

The banking regulator has recently released draft norms for small banks and payment banks that will focus on a niche segment