Corporates have better chance for bank licences now: Experts
The clarifications issued by Reserve Bank on new bank licence norms Monday leave lesser room for regulatory discretion and disputes and make very serious players like deep-pocket corporates to finally seek the licence, said experts.
Mumbai: The clarifications issued by Reserve Bank on new bank licence norms Monday leave lesser room for regulatory discretion and disputes and make very serious players like deep-pocket corporates to finally seek the licence, said experts.
"Today's clarifications have rendered a lot of clarity to the whole process and makes even more difficult for many to finally get the licence.
"The best part is that it has considerably reduced the element of discretion at the hands of the regulator and thus leaving limited rooms for disputes," Ernst & Young India partner and national leader for banking and financial services Ashvin Parekh said.
He further said the clarifications look favouring large corporates to get banking licences and not non-banking finance companies.
Earlier in the day, RBI has issued clarifications to as many as 443 questions from 39 organisations about the holding and capital structure of the proposed non-operative finance holding company that licence aspirants should set to open a bank branch apart from many others things like extending the time-line to get this holding company in place, reducing the promoter holding to 18 months from 12 months.
"I fear it will hurt many, especially NBFCs as the guidelines look favouring corporates over NBFCs, because the new guidelines are so tough to be complied with. With these clarifications I see lesser chances for NBFCs and better chance for corporates to bag new banking licences. It will be much tougher for NBFCs now, I am afraid," Parekh said.
On how many licences he sees finally getting issued, he said "very few-- may be three to four out of around 30 applications".
Monish Shah, senior director at Deloitte India said: "With these clarifications on the non-operative finance holding company, the RBI has ensured that the new structure would not pose any systemic risks as these norms have ring-fenced the system."
He said that this gives licence-holder around four years to get into the proposed structure.
"The capital structure of the NOFHCs gives individual clarifications such as what sort of revamp they should be undertaking to meet the licence norms," he said adding overall there is better clarity now to the process.
On the number of prospective licence holders, Shah said: "the economy needs at least 8-10 new banks to meet the growth demands but I don't think as many getting licences."
When sought his view whether RBI leaving final views on the structure of the NOFHCs to Sebi and Irda for AMCs and insurers, does leave some room for regulatory overlap, Parekh said, he does not think so as as each of these regulators have separate remit.
"For instance, he said, the RBI is worried about the safety of deposits, while Irda is worried about the solvency of the insurance company.