NBFCs rally as RBI unveils new banking norms

Shares of non-banking finance companies (NBFCs) such as Bajaj Finserv, Mahindra and Mahindra Financial Services, Reliance Capital and Srei Infrastructure Finance have rallied for the second day in a row after the Reserve Bank of India (RBI) releases draft guidelines for licensing of new banks in the private sector. The existing NBFCs, if considered eligible, may be permitted to either promote a new bank or convert themselves into banks.

In its much-awaited draft guidelines for new private banks released on Monday, the RBI said private groups or entities with diversified ownership, sound credentials and a “successful track record" of 10 years would be allowed to apply for new banking licences. The central bank is considering issuing banking licences for the first time since 2004.

The new banks can be set up only through a wholly owned, non-operative holding company, or NOHC, that will control the bank and other financial service companies in the group, the RBI said. The NOHC, which will be registered as a non-banking finance company with the RBI, will include all financial arms of the founding group.
 
“The minimum capital requirement will be Rs 500 crore and the aggregate foreign shareholding in the new bank shall not exceed 49% for the first 5 years after which it will be as per the extant policy," the RBI said in a press release.
 
Among the individual stocks, Bajaj Finserv is the largest gainer, up 9% at Rs 625 on the BSE. The stock has gained 25% in past two trading days from Rs 500 on Friday, August 26.
 
Srei Infrastructure Finance is up 7% at Rs 42.30, followed by Mahindra and Mahindra Financial Services (up 5%) and Reliance Capital (up 4%).