Bank licence deadline today,nearly 30 in queue

The deadline for putting in applications for a bank license will close on Monday.

The deadline for putting in applications for a bank license will close on Monday. Nearly 30 companies have applied for Indias biggest change in the financial sector in more than a decade. Another five-odd are expected to do so before the 5:45p.m. deadline set by the Reserve Bank of India RBI to receive the completed applications expire.

The notable exception in the list so far is the Tata group while Mahindra amp; Mahindra Financial Services have already issued a statement declaring their intention not to apply. The reasons ascribed by them had also been flagged by other industrial groups,including reportedly the Tatas. However there is no confirmation of the same.

On Saturday,the financial arm of Larsen amp; Toubro,Lamp;T Financial,also decided to join the queue. Shriram Transport once considered one of the certain applicants has also stayed out so far.

The RBI has already reiterated there will be no extension of the deadline for putting in applications. The finance ministry had flagged the intention to give out new bank licenses in Budget 2010-11. The first of these bank licences are expected to be handed before the end of this financial year,but doubts remain.

One of the strong contenders for the licence is the Anil Ambani group firm Reliance Capital that has roped in Japans Sumitomo Mitsui Trust Bank and Nippon Life Insurance as strategic partners.

According to the proposal,the two Japanese firms would own 4 to 5 per cent stake in the proposed bank. Sumitomo Mitsui Trust Bank is one of the largest banks in Japan,while Nippon Life Insurance is among Asias largest financial services company and already has strategic stakes in Reliance Capitals life insurance and mutual fund units.

The Aditya Birla Group is another major contender among corporate houses for the licence. The banking licence guidelines are very clear. They are not discriminatory towards large corporate houses, Aditya Birla Group chairman Kumar Mangalam Birla had said earlier.

Story continues below this ad

Among non-banking financial companies NBFCs,Srei Infrastructure and Edelweiss Financial are in the queue for a permit as is Magma Fincorp.

State-owned Power Finance Corporation and Tourism Finance Corporation are also understood to have applied. The finance ministry has been pushing hard for giving out more bank licences and industrial groups had supported this as a major development for the economy.

There are also concerns on the compliance requirements,which was one of the reasons Mahindra Finance decided to opt out. The company had cited the adverse economic and operation impact on the group especially as regards provisions for priority sector lending,cash reserve ratio and statutory liquidity ratio that would have to be met from the start,leading in effect,to higher liabilities.