Shares of banking licence applicants slump

Shares of fifteen banking licence applicants fell by 1.10% to 8.14% on BSE

Shares of fifteen banking licence applicants fell by 1.10% to 8.14% at 9:46 IST on BSE after the Reserve Bank of India granted in-principle approval for new bank licences to IDFC and Bandhan Financial Services.

SREI Infrastructure Finance (down 8.14%), L&T Finance Holdings (down 7.31%), IFCI (down 5.98%), Magma Fincorp (down 5.90%), Muthoot Finance (down 4.49%), IIFL Holdings (down 3.77%), Tourism Finance Corporation of India (down 3.69%), Reliance Capital (down 3.07%), Edelweiss Capital (down 2.27%), LIC Housing Finance (down 2.18%), Indiabulls Housing Finance (down 1.96%), Religare Enterprises (down 1.95%), JM Financial (down 1.43%), Bajaj Finserv (down 1.39%) and Aditya Birla Nuvo (down 1.10%), edged lower.

However, IDFC was up 4.02% at Rs 133.15.

The S&P BSE Sensexs was up 6.05 points, or 0.03% at 22,557.54.

The Reserve Bank of India (RBI) on Wednesday, 2 April 2014, granted in-principle bank licences to IDFC and unlisted microfinance lender Bandhan Financial Services. The in-principle approval granted will be valid for a period of 18 months during which the applicants have to comply with the requirements under the guidelines and fulfil the other conditions as may be stipulated by the RBI. On being satisfied that the applicants have complied with the requisite conditions laid down by the RBI as part of in-principle approval, they would be considered for grant of a licence for commencement of banking business under Section 22(1) of the Banking Regulation Act, 1949. Until a regular licence is issued, the applicants would be barred from doing banking business, RBI said in a statement.

On Tuesday, 1 April 2014, the Election Commission (EC) of India allowed the RBI to go ahead with the process of licensing a third set of private banks after the start of economic liberalization in 1991. The last time RBI licensed new banks was in 2003-04, when it opened the doors to Kotak Mahindra Bank and Yes Bank.

The approval came after the RBI missed the March-end deadline for issuing the bank licences. The RBI on 12 March 2014 approached the EC seeking its approval for granting bank lincences as the model code of conduct had come in place after the general elections announcement on 5 March 2014.

According to reports, the RBI had received 27 applications initially. Later, Tata Sons and Value Industries withdrew.