Bajaj Fin may rejig management to abide by RBI’s banking norms; Currently Bajaj Group is the only NBFC that has shown interest in converting into a bank, which has a sizeable auto business

December 2, 2013 Leave a comment

Bajaj Fin may rejig mgmt to abide by RBI’s banking norms

Just a day after the Tatas opted out of the race for a banking licence, its Pune-based rival business family Bajaj reiterated its commitment and intent on converting from a non-banking financial company into a full-fledged bank. In an exclusive interview with CNBC-TV18, Rajiv Bajaj, director, Bajaj Auto said its finance arm – Bajaj Finance– may undertake an organisational restructuring to ensure that there is no ‘conflict of interest’. Bajaj said that the firm was in a dilemma since currently the auto division of the finance company finances 30 percent of Bajaj Auto’s total domestic sales. This could get impacted if the NBFC becomes a full-fledged bank raising questions of a possible ‘conflict of interest’ . The MD of Bajaj Auto said that it is engaging experts to ensure that while the new bank complies with the requirements at the same time lending to Bajaj Auto is not impacted.Auto Finance division of Bajaj Auto is managed by me through my colleague who too is a Bajaj Auto employee. If Bajaj Finance becomes a bank then to avoid any ‘conflict of interest’ we may have to relinquish our roles in managing the auto division,” Bajaj told CNBC-TV18. 

He also voiced concerns at a time when Bajaj’s competitors are becoming aggressive in auto lending the companycould ill-afford to hamper two-wheeler and three-wheeler lending for Bajaj Auto. Shareholders of Bajaj Auto could be concerned as financing is critical to combat competion and the slowing economy and is the lifeblood of sales. We are seeing our competitiors strengthen their financing arms. We need to find out the optimum middle ground,” he added.

A senior executive in the banking industry told CNBC-TV18 that auto companies wanting to convert into full-fledged banks could face this dilemma.
Currently Bajaj Group is the only NBFC that has shown interest in converting into a bank, which has a sizeable auto business. In fact Bajaj Auto is the ‘golden goose’ for the entire Bajaj Group.

Other groups with auto businesses like the Tatas and Mahindras have already opted out of the race for winning a banking license. Maruti Suzuki and Hero MotoCorp have already said they have no ambition to becoming banks.
Tatas and Mahindras have cited the stringent condition of meeting CRR and SLR requirement from the first day of becoming a bank. “After prolonged deliberations and detailed analysis, Tata Sons has therefore decided to withdraw its application dated July 1, 2013, from the current round of licensing,” Tata Sons had said in a statement on Thursday.

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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