Shriram Group to go ahead for bank license application

Group will have a board meeting this week where board will formally give its go ahead for application

Shriram Group has finally decided to go ahead with its banking ambitions and apply for a banking license.

The group will have a board meeting this week where the board will formally give its go ahead for the application. July 1 is the last date for applying for the license. Earlier there were apprehensions that Shriram Group may not apply for the license as it doesn’t want to give away its huge business and customer base of non banking financial company (NBFC). G S Sundararajan, group director, Shriram Group had earlier told Business Standard that groups preference would be getting a separate license under Shriram Capital – the holding company and keep two NBFCs separate from it.

"We are definitely going to apply for a banking license as it is good for our customers and all stakeholders in the long run” Sundararajan told Business Standard on Saturday.

Reserve Bank of India’s guidelines for new bank licenses mandates existing NBFCs to convert into the bank if they are granted license.

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

Shriram Group has two NBFCs under it. Both NBFC collectively have assets under management (AUM) of about Rs 65,000 crore. Shriram Group’s NBFC’s posses a significant challenge of conversion. Higher AUM and large number of employees who have been doing NBFC businesses are some of the challenges which Shriram is likely to face. Shriram is yet to decide on structure of the business under non operative financial holding company (NOFHC) as required 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” Sundrarajan added. “Larger the lending businesses, greater will be the complexities” he said adding “in next 10 days we will try to get an optimum solution and out our best foot forward" he said.