Shriram Group to enter the fray

The Chennai-based Rs 60,000 crore diversified Shriram Group, has said it would like to set up a new bank, instead of converting one of the non-banking financial companies (NBFCs) to a bank. The group is one of the business conglomerates which has shown interest for banking licence.

If the group gets a separate licence from the regulator, then it would run both a bank and NBFC. It may be noted the Reserve Bank of India has said NBFCs will not be allowed to undertake a business that a bank can do.

According to industry experts, this will be a major challenge for the Group's aspiration.

At present the group has two NBFCs -" Shriram Transport Finance Corporation (STFC) and Shriram City Union Finance (SCUF) -" which have assets under management (AUM) to the tune of around Rs 50,000 crore and Rs 15,000 crore respectively. These two companies fund businesses, which provides livelihood to the borrowers. Group Director of Shriram Group G S Sundararajan, who was identified by the Group to head the Banking initiative, said that the new guideline was not different and it was largely in line with what the preliminary guidelines were.

"We have to clarify a few clauses with the Reserve Bank of India (RBI). We still are in the process of evaluating the various provisions under the guidelines," said Sundararajan.

He added that the group is proceeding with the application on the back drop of RBI's thrust, which is to improve financial inclusion.

The group continues to prefer a new licence, said Sundararajan, who had earlier said that the group wanted to be "the Wells Fargo (US banking giant) of India". However, if the banking foray has to be at the cost of its existing businesses, then the group will as well say no to it, added Sundararajan.

Both the management and analysts feel that the group's 10-million customer base will be the game changer, compared to other conglomerates that are eyeing a banking licence.

The group's two NBFCs -" Shriram Transport Finance Corporation (STFC) and SCUF -" have assets under management (AUMs) of around Rs 50,000 crore and Rs 15,000 crore, respectively.

Besides these two NBFCs, through chit funds, insurance ventures, brokerage and advisory firms and other financial services the Group has touched around 10 million customers.

Out of this, 20 per cent (2 million) customers will be eligible for banking products, said Sundararajan. "We can rope them into the system in less than two years from the day we start operations," he added.