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Birla, Tata review use of parent branding for bank

Last updated on: April 15, 2013 12:26 IST

Birla, Tata review use of parent branding for bank

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Dev Chatterjee & Viveat Susan Pinto in Mumbai

Top Indian conglomerates, including Aditya Birla Group and the Tatas, have sought clarity from the banking regulator on using the branding of the parent group while applying for a banking licence. Corporate lawyers confirmed the groups had sought the Reserve Bank of India's views on the use of the parent group's brand.

The brand name of the proposed bank has to be sent to RBI by July 1, the deadline for application. A senior Birla official said they were looking at the option of not using the parent brand, following the interpretation by their lawyers of RBI's guidelines.

Hence, they had sought the regulator's clarifications on using the brand name before April 10, when the deadline for seeking clarifications from the regulator on bank applications expired.

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Image: Cyrus Pallonji Mistry, Chairman, Tata Group.
Photographs: Danish Siddiqui/Reuters

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A spokesperson of the Birla group said: "It's too premature to have a view on branding." Once the RBI's clarification on using the parent brand comes in, these conglomerates would take a call on the parent brand name.

"We are currently reviewing the guidelines and, hence, wouldn't be able to comment on this at the moment," said a Tata spokesperson.

Insiders said a survey done by the Birlas have shown that the Aditya Birla brand was associated with a high degree of trust, ethics, reliability and corporate governance. The Tata group, too enjoys positive brand image among Indians.

Both Tata and Birla have non-banking financial companies using the parent's brand name.

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Image: Aditya Birla Group Chairman Kumar Birla.
Photographs: Bazuki Muhammad/Reuters

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Interestingly, the Hindujas, one of the first conglomerates that had received a banking licence, did not use the parent group's brand name. Instead, it used the IndusInd brand.

Among the other conglomerates seeking a banking licence are Mukesh Ambani's Reliance Industries, Anil Ambani's Reliance Capital, the Mahindras and the Videocon group.

Brand advisors said it makes sense for RBI to insist on new brands. Ashish Mishra, managing director, Interbrand India, said RBI should allow the use of parent brands to avoid unnecessary expenses.

"A new brand will mean the corporate entity will have to invest to build it. This expense can be avoided if the entity is allowed to carry its name into the banking activity."

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Image: Reserve Bank of India's logo outside its head office in Mumbai.
Photographs: Danish Siddiqui/Reuters

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"In my view," said Nabankur Gupta, founder & CEO of Nobby Brand Architects, "RBI is keen to create a level playing field. A large corporate house has a heritage attached to it and its brand name carries heft. This could give it an unfair advantage over a smaller player, which may not have that big a name."

Harish Bijoor, chief executive officer of Harish Bijoor Consultants, said consumers can be gullible when it comes to financial matters. "Stretching the parent brand equity into a banking business could be dangerous. RBI is keen to avoid this situation."

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Image: Mukesh Ambani, Chairman and Managing Director of Reliance Industries.
Photographs: Pascal Lauener/Reuters

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Bijoor said it would be advisable to start anew. "My advice to new players: No problem if you have to create a new brand. It makes sense that you start afresh in a business such as banking, with no residual brand equity of the parent."

RBI had sought applications from Indian companies after a raging debate on whether companies should be allowed into banking.

A section of economists had argued that companies should not be allowed into banking, as it would lead to the bank giving loans to promoter group companies. But RBI decided to invite applications from all and is expected to issue licences after going through the applications.


Image: Anil Ambani, Chairman of the Reliance Anil Dhirubhai Ambani Group.
Photographs: Danish Siddiqui/Reuters
Tags: RBI , Bijoor , Tata , Birla

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