rediff.com

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News 
Rediff.com  » Business » Birla, Dhoot join banking bandwagon

Birla, Dhoot join banking bandwagon

June 26, 2013 09:51 IST

Aditya Birla Nuvo said its board of directors had approved a proposal to apply for one of the new bank licences. It is the holding company of Aditya Birla Financial Services, the group’s non-banking financial company (NBFC). Another large industry house, Videocon Industries, gave its application for a bank licence today.

Venugopal Dhoot, chairman, said: “Videocon is a mass brand, with strong rural identification. Therefore, it will have great visibility (as a bank).” Unlike most of the new banking aspirants, Videocon is not present in the financial services sector.

The final date for applying to the Reserve Bank of India (RBI) is Monday. AB Nuvo is also into the insurance and asset management business, apart from lending. Their loan book was Rs 8,000 crore (Rs 80 billion) as of March, 135 per cent more than a year before.  

Aditya Birla Financial Services as an NBFC has already started rural penetration. Currently, most of it branches are in urban areas. Rural penetration is one of the key aspects in RBI’s new bank licence conditions, since the aim is to promote meaningful financial inclusion. Only 40 per cent of India’s adult population have bank accounts. 

Aditya Birla Financial also lends to suppliers and vendors of the Aditya Birla Group, mostly based in semi-urban and rural areas. 

Tata Capital, NBFC arm of the Tata Group, said it was reviewing the RBI guidelines and would soon announce its decision on whether to apply. Yesterday, another business conglomerate, Mahindra & Mahindra’s financial arm, M&M Financial Services, had said it would not apply, citing an inadequate transition period for large NBFCs. 

Some other financial services entities such as Shriram Capital, SREI Infrastructure Finance and IDFC have already announced their decision to apply. RBI has mandated 25 per cent of the branches in the new banks must be in hitherto unbanked rural centres. Also, the new entrants must follow the cash reserve ratio and statutory liquidity ratio norms from inception. The successful applicants would get 18 months to start operations after getting a licence.

BS Reporter in Mumbai
Source: