The final list of applicants for new bank permits includes those with a wide range of business interests and background.
The common refrain among them is however making it past the tough norms put out by the Reserve Bank of India for the non operative financial holding companies. For non banking finance companies (NBFCs) particularly the process of converting to a bank and meeting provisions of cash reserve ratio and statutory liquidity ratio will be a tough call. Mahindra Finance chose to bow out of the race saying this will be even more difficult for large NBFCs. Its contention would seem to be proved as smaller NBFCs like Muthoot Finance,Srei Infrastructure Finance and
India Infoline decided to apply. But then on the last day Shriram Capital,Indias largest NBFC too did apply.
Typically,NBFCs provide banking facilities raising deposits from banks for running a unencumbered loan book. Transition to a bank would be the next logical step. But the challenge for such firms is that the RBI does not plan on giving them ample time or flexibility for the NBFC and the bank to coexist for some time. The requirement of meeting 23 per cent SLR and 4 per cent CRR from Day 1 of operations means that it would burden their balance sheets even as their savings and current deposits would take time to build up. Analysts argue that though indications were always given that NBFCs would be favoured when applying for new bank permits,the provisions have been made unnecessarily cumbersome. Many of the NBFCs that have applied contend they are keen for a bank permit,irrespective of the tough guidelines but are hopeful that the RBI would engage in a dialogue on the issue. But it seems difficult for the regulator to start fresh discussions and revisit the eligibility criteria after taking in the applications.
This could stretch the process of handing out new licences by more than six months which is the earliest expected in the current time table.
Surabhi is a special correspondent based in New Delhi.