Shriram Capital, the holding company of the Chennai-based Shriram Group, will apply for a banking license after the Reserve Bank of India (RBI) announces the final guidelines. The bank will primarily target middle-to-low-income customers in tier II and semi urban areas.
“We would be applying for a banking license as soon as the RBI comes up with the final guidelines,” Arun Duggal, chairman, Shriram Capital told Hindustan Times.
Shriram Capital, a non-banking finance company (NBFC), has 50 lakh customers, primarily in smaller towns.
However, Shriram Capital may not be interested in a full-service bank, Duggal said. “We are not looking at large corporate customers, we would continue to focus on small and medium-sized customers.”
Finance Minister Pranab Mukherjee had said in his budget speech that the RBI would issue licenses to new private sector banks.
Business groups, such as the Adiyta Birla Group, the Tatas and Reliance, have shown interest in the banking sector.
Besides, Shriram Capital would also foray into the housing finance segment.
Though the banking network in the country has improved significantly, about 50 per cent of the population is still outside the banking net. The government has underlined the need to expand the scope of financial inclusion.
In 1993, about a dozen licenses were given, though only about three survived. The objective was to infuse competition. The government now is looking to expand the banking network through financial inclusion. HDFC Bank and UTI Bank—now re-christened Axis Bank — were among those that were given licenses in the early 1990s.
NBFCs that were allowed to be converted into banks include Kotak Mahindra Finance and 20th Century Finance.
At present, there are 27 public sector banks, 22 private banks, 31 foreign banks in India, apart from regional rural banks and cooperative banks.