Itc Puts Off Bank Plan Sourav Majumdar

The ambitious plan by ITC Ltd to set up a commercial bank has, for all practical purposes, been dropped.

ITC is not pursuing the bank licence application with the Reserve Bank of India any longer.

According to sources in ITC, the reason why the bank plan has been left out is chiefly because of the problems with ITCs financial services associate, ITC Classic Finance.

After the initial application was made to RBI a couple of years ago, the apex bank had reverted to ITC, saying the application needed to be made by ITC Classic, since ITC itself had no background in financial services. That was done, but Classics subsequent problems have now meant that there is no further move from the ITC side to get the banking licence going. Classic ran up a huge Rs 285 crore loss for 1996-97.

 

Says a senior ITC executive associated with the proposal:For all practical purposes, the bank plan is off. We are not pushing it any further and it would die a natural death.

The dropping of the bank plan virtually marks the end of ITCs major hopes to emerge as a financial services conglomerate powered by ITC Classic. ITC chairman Yogi Deveshwar has also made it clear that financial services is not a core business any longer for ITC Ltd.

The Rs 5,960 crore ITC Ltd had sought in 1994 to turn Classic into a virtual holding company for all its financial services operations, particularly since ITC Classics size of operations at the time also meant the company was ideally suited to virtually run like a bank itself.

But even at that time, RBI had kept the ITC application pending because of ITCs pending excise litigation and also because ITC was a manufacturing company. Thereafter, the application was transfered to Classics name.

With ITC no longer interested in financial services as a business, the bank plan also does not make much sense, sources pointed out, adding that there has been virtually no headway on that front after the initial spurt of action when the financial services division was all gung-ho about getting into commercial banking.

Currently, the entire focus of ITCs heavily depleted financial services division is on finalising the detailed package for ITC Classic, and enabling ways in which ITC can, backed by assets, pump in funds to support the finance company.

Alongside, the messy real estate investments are also being set right by the company, which is picking up assets as well as holdings in real estate related group companies.