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The RBI has released the guidelines for ‘on-tap’ licences for universal banks, which opens up a window of opportunity for non-banking finance companies. Earlier, 24 NBFCs had applied for bank licences, but only two — IDFC and Bandhan — got the coveted licence. This time around, more NBFCs could get through even though industrial houses will still be kept out of the banking business. Speaking to BTVI , Manappuram Finance MD and CEO VP Nandakumar says the company will be applying for the licence as it will help lower cost of funds and scale up business. Excerpts:
The RBI has come up with the ‘on-tap’ bank licence guidelines. Why has the RBI kept the five-year perspective for applying for a universal bank licence? Earlier, you had mentioned that Manappuram will be looking at universal bank licence probably in the next five years. Will you be applying this time around?
We had sought a 5-year time for applying for banking licence because more than 80 per cent of our assets under management are non-priority or gold loans. We have to immediately comply with the sectoral lending target. So it may take some time. Even the capital requirement is around Rs. 500 crore, which is much higher with regard to the capitalisation. When we compete with other banks, we need to be adequately capitalised. But having seen the RBI guidelines, I think we do not need to wait for five years provided we reach an agreement in the board.
We can go even before that because the guidelines are rather facilitatory than the long-term vision as prescribed in the past. With a successful track record of 10 years, the applicant will be able to comply with this. So generally, I think it is a positive move and a facilitatory one. So I think we should be applying for the bank licence even earlier than what we have said in the past.
Do you think the new guidelines are a move by the RBI to liberalise the banking regulation? Earlier, we had 24 applicants and out of that only two —IDFC and Bandhan —got the approval.How many firms do you think will apply this time around? Do you think this is a good policy framework?
I think it is a good policy. NBFCs whose non-financial business contributes to the extent of 50 per cent of total loans can’t apply. Thereby, some industrial houses are barred. Whereas, NBFCs such as Manappuram are allowed. There could be 10-12 applications this time. I am hopeful that at least 80 per cent of them will get the licences.
Link:-http://www.thehindubusinessline.com/todays-paper/tp-news/manappuram-sees-810-nbfcs-in-the-race-for-banking-foray/article8936217.ece