Tata to Ambani Vie for First India Bank Permits in a Decade

July 4, 2013 Leave a comment

Tata to Ambani Vie for First India Bank Permits in a Decade

Tata Sons Ltd., which manages India’s biggest business group, and firms controlled by billionaires Anil Ambani and Kumar Mangalam Birla are among 26 seeking the country’s first new banking licenses in more than a decade.

The companies yesterday met the Reserve Bank of India’s deadline to apply for the permits, it said in a statement published on its website.New banks will help tap rural savings and bolster loan growth in an economy that’s grown at the slowest pace in 10 years, Dolly Parmar, a Mumbai-based banking analyst at IFCI Financial Services Ltd., said by phone. Of the 600,000 villages in Asia’s third-biggest economy, only about 36,000 have access to a commercial bank branch, according to RBI estimates.

Banks will be required to open within 18 months and one out of four branches must be located in towns with fewer than 10,000 people, the RBI said when calling for applications. Tata Sons, IDFC Ltd. (IDFC), L&T Finance Holdings Ltd. (LTFH), Bajaj Finserv Ltd. (BJFIN) and Aditya Birla Nuvo Ltd. (ABNL) will be top contenders for permits, Parmar predicts.

Foreign ownership in the banks, which should have equity capital of at least 5 billion rupees ($84 million), will be capped at 49 percent, according to the central bank.

Potential applicants including Mahindra and Mahindra Financial Services Ltd., a unit of India’s biggest SUV maker, and Piramal Enterprises Ltd. (PIEL) may have been dissuaded by the stringency of the RBI’s rules, said Vishal Narnolia, a Mumbai-based banking analyst at SMC Global Securities Ltd.

New banks will be required to meet higher capital standards and reserve ratios, face restrictions on holding company activities and be obliged to sell shares within three years of starting business, according to the central bank.

The RBI may award as many as five new permits by March, Narnolia predicts.

To contact the reporter on this story: Anto Antony in Mumbai at aantony1@bloomberg.net

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