Taking the process of issuing new private bank licences forward, the Reserve Bank of India (RBI) today met stakeholders, including industry body CII, which called for a higher minimum capital requirement of Rs 1,000 crore.
The Confederation of Indian Industry (CII), which is represented by a slew of executives from non-banking lenders, said a lower capital (below Rs 1,000-crore) would result in relatively small banks which could potentially lead to higher risk-taking and more volatile earnings.
"This in turn could result in lack of focus on financial inclusion and defeat the very purpose of this round of licencing," the top chamber said in a statement later.
In a discussion paper floated in August, the central bank had listed pros and cons of keeping minimum capital requirement at a low level of over Rs 300 crore, middle-level of Rs 500 crore and a high level of Rs 1,000 crore.
Stakeholders were given time till September 30 to reply after which the banking watchdog has started meeting them to discuss the finer details.
NBFCs turned out in large numbers for the meet with the likes of Tata Capital, Aditya Birla Financial Services, L&T Finance, Mahindra & Mahindra Finance, Indiabulls Finservice, Sriram Transport and Magma Fincorp, among others, meeting RBI officials.
While RBI also met bankers from SBI, ICICI Bank, Bank of Baroda, Union Bank of India, among others, none of them could be contacted for comments after the meet.
Indian Banks' Association's (IBA) Chief Executive K Ramakrishnan also met RBI officials.
"We are very excited about this new opportunity and have given our inputs as well...It was a general discussion on how the business is, what the business model is," M&M Finance Managing Director Ramesh G Iyer said.
The RBI has not set any timeline for the completion of the process and is simply eliciting views currently, he added.
CII also hinted that it is in favour of allowing large corporates into banking, which has become a contentious issue with concerns raised over potential conflict of interests.
"Industrial and business houses are today permitted to participate in all sectors of the economy open to the private sector...Industrial and business houses that have predominant presence and experience in the financial sector could be allowed," the CII statement said.
Finance Industry Development Council, a lobby of NBFCs, told the RBI that NBFCs are better placed to get into banking as they already have an expertise in working in rural and semi-urban areas, which will help in furthering the financial inclusion agenda, its Director General Mahesh Thakkar told newspersons.
In its submission, CII also asked for NBFCs to be treated at par with other applicants, but maintained that they should not be automatically given the status of a bank.
Considering the need to attract large capital to the banking sector to fund growth, "CII is open to the idea of tapping foreign shareholder capital as well", the CII statement said.
