L&T Finance Holdings Ltd led non-bank lenders higher here trading after parliamentary approval of laws giving the Reserve Bank of India (RBI) more freedom to issue bank licences. L&T Finance jumped as much as 5.2 per cent to Rs 97.4, the highest since listing in August 2011, and traded at Rs 94.5 as of 12:03 pm. Mahindra & Mahindra Financial Services Ltd rose 1.6 per cent to Rs 1,096 and Bajaj Finserv Ltd gained 1.6 per cent.
The new banking laws also include raising limits on voting rights for shareholders in state-controlled lenders and allow the banks to raise capital through rights offerings.
Yesterday’s approval ends a two-year process that could lead to banking competition for State Bank of India, the country’s largest, and ICICI Bank Ltd, its biggest private lender. “This would pave the way for RBI to issue much-awaited new banking licences, for which a lot of non-bank financial companies have been queuing,” Deven Choksey, managing director at Mumbai-based K R Choksey Shares & Securities, said by phone. “An increase in voting rights would mean better investor representation in lenders, especially state-owned banks, which can attract investment into the sector.” The final rules for banking permits will be issued after the central bank has received the additional regulatory powers, Governor Duvvuri Subbarao said last month.
Given the criteria set by RBI, L&T Finance and Mahindra & Mahindra have a strong chance of getting licenses, Antique Stock Broking Ltd. analysts led by Sunesh Khanna wrote in a note dated December 11.
Under the rule changes, the limit on voting rights of shareholders in state-run banks was raised to 10 per cent from one per cent, and in other lenders to 26 per cent from 10 per cent.
