Tata, Birla, Bajaj, and Piramal Group may lead race for bank licence

Top Indian conglomerates led by Tata, Birla, Piramal, and Bajaj will seek a banking licence provided the norms for conversion of non-banking finance companies (NBFCs) are made easier and comprehensive regulation does not apply to rest of the group firms, sources said.

A top Tata group official said the group is really interested in getting into banking but it is too early to elaborate as only recommendations are out and work is in nascent stage. “We will look at it when financial rules are framed,” the official said while asking not to be quoted.

A Tata insider said that in 2012, when the Reserve Bank last sought banking licence applications, several firms including theirs “had to send documents of all group companies in huge trunks as requirements were so large”. 

Tatas withdrew the application by November 2013, as the RBI norms were too restrictive. Later, the RBI did not give a licence to any industrial house.

As of March 31, Tata Capital Financial Services had net worth of Rs 6,213 crore. Tata Capital is the holding company for the financial services businesses and has a diversified product portfolio with a presence in both the wholesale and retail finance segments. 

While Tata Capital had assets worth Rs 83,280 crore at consolidated level, Tata Capital Financial had assets worth Rs 46,807 crore. Tata Sons has infused of Rs 6,300 crore in Tata Capital since its inception. A major chunk of that was infused only in FY18-19 (Rs 2,500 crore) and  FY19-20 (Rs 1,000 crore).

This equity capital infusion is a strong indicator of the focus on the lending business, an analyst said.

The RBI discussion paper said all experts in its panel, barring one, were of the view that large corporate and industrial houses should not be allowed to promote a bank. The panel left it to the government to take a call by amending the Banking Regulation Act. “Indian companies will not mind taking a stake in present banks also as there are several good opportunities even in the public sector banks,” chief executive officer of a NBFC said.

An Aditya Birla Group official said: “NBFCs with a proven track record, supported by the brand values of reputed corporates, can play a key role in bringing the benefits of banking and economy to the underserved and newer segments of India.”

Aditya Birla Capital had total assets of Rs 70,015 crore as of March — making it a strong contender for a banking foray.

The Piramal Group, which is in a bidding war to buy DHFL’s retail books, is also likely to seek a banking licence as it already has a big NBFC. But the NBFC’s overall loan book reduced from Rs 56,624 crore as of March 2019 to Rs 50,963 crores as of March this year. 

“The Piramal Group has rich experience in the sector, but its high exposure in the real estate sector has become a cause of concern,” said an analyst. “If Piramal acquires DHFL retail book, they will have a steady stream of cash flow and balance its corporate loan book.” 

Sanjiv Bajaj, chairman and managing director of Bajaj Finserv, and MD of Bajaj Holdings & Investment, said on Friday that RBI internal working group report on review of bank ownership is progressive, practical, and protective to all stakeholders’ interests. “Onwards to Atmanirbhar financial services for Atmanirbhar India," Bajaj, who is also chairman of Bajaj Finance, Bajaj Allianz & Bajaj Housing Finance, had said.