Mumbai, Aug. 11: In what could be a change from its past policy, the Reserve Bank of India (RBI) seems less squeamish about allowing large industrial houses to promote banks. The central bank is also toying with the idea of changing the total stake foreign shareholders can hold in Indian banks.
On Wednesday, the RBI floated a discussion paper for entry of new private sector banks and it has invited comments from existing banks, industrial houses and finance firms on these points. Another important point of discussion is whether existing non-banking finance companies should be allowed to convert to banks.
RBI has also made it amply clear that companies with real estate exposure wouldn’t be allowed to promoter banks.
The discussion paper has been widely welcomed. Brokerage house Emkay Global Financial Services said that the final guidelines could be positive for companies like Reliance Capital, Future Holding, AB Nuvo, LIC Housing and GIC Housing and broking houses not having exposure to real etate sector. It could be negative for financial services players with presence in real estate like Indiabulls Finance, India Infoline etc.
Mr Jagannadham Thunug-untla of SMC Capitals Limited says “either ways this discussion paper is clearly a game changing event. Companies that are able to get the license will sit on a gold mine. YES Bank was the last bank to get the banking license in India and we have seen the kind of wealth creation that it was able to create in just five years.”
The RBI says it is in favour of a larger number of banks as it would “foster greater competition and thereby reduce cots and improve quality of service.” It also hopes it would fulfill the goal of financial inclusion and ultimately support inclusive economic growth which is the key focus of public policy.
Justifying why it could consider giving licenses to industrial and business houses with experience in financial services it said that in the last 17 years banks promoted by individual banking professionals either failed, amalgamated with other banks or had muted growth.