Shriram Group eyes banking licence

Board to give formal go-ahead for application later this week

After some hesitation, the Shriram Group has finally decided to apply for a banking licence.

The Chennai-based group’s board will meet this week, and is expected to give a formal go ahead for the application. July 1 is the last date for applying.

Earlier, there were reports that the Group might not apply because it did not want to give away the huge business and customer base of its non-banking financial companies (NBFCs).

The Group has two NBFCs with collective assets under management (AUM) of about Rs 65,000 crore.

Shriram Group’s group director, G S Sundararajan, had earlier told Business Standard that the group’s preference would be getting a separate licence under Shriram Capital, the holding company, and keep the two NBFCs separate from this.

“We are definitely going to apply for a banking licence, as it is good for our customers and all stakeholders in the long run,” Sundararajan had told Business Standard yesterday.

According to the Reserve Bank of India (RBI) guidelines for new licences, existing NBFCs should convert into a bank if they are granted one.

Since RBI released clarifications on the banking licences on June 3, the group’s flagship NBFC, Shriram Transport Finance’s stock has declined nearly 10 per cent on worries that the guidelines aren’t conducive for the group.

Shriram Group’s NBFC’s possess a significant challenge of conversion. A higher AUM and a large number of employees are among the challenges.

The company is yet to decide on the structure of the business under the non-operative financial holding company, as stipulated by RBI.

“We are internally debating the complexities of the structure and the requirement of folding in all the lending businesses, as we have very large businesses on the lending side,” said Sundararajan. “The larger the lending businesses, the greater will be the complexities”. Adding: “In the next 10 days, we will try to get an optimum solution and put our best foot forward.”