Non banking financial companies (NBFCs) may finally get to set up banks, though they face tough questions from the Reserve Bank of India (RBI) which is scheduled to come out with new guidelines on granting new banking licences by January.
NBFCs including Shriram Finance, LIC Housing, Mahindra are keen on entering the sector.
Finance minister Pranab Mukherjee in his budget speech said the central bank would issue new banking licences, following which RBI had put up a discussion paper on the issue in August.
“NBFCs have been already operating in semi-urban areas, catering to the unbanked population and there is no reason why they should not be considered,” an official source who did not wish to be identified told Hindustan Times.
The Finance Industry Development Council (FIDC) —a self regulatory organisation for asset financing NBFCs —has said that NBFCs have played an important role in the country’s financial system.
Mukherjee had spoken of new banks to aid financial inclusion of the unbanked.
However, in its paper, RBI said there is a “light-touch” regulatory framework for NBFCs that do not take deposits whereas banks need tougher conditions. “As such, the ability of the NBFC to run a bank under a heavier regulation cannot be extrapolated from this experience,” the RBI paper said.
The central bank also raised concern over the low capital requirement of NBFCs that need a minimum of only R2 crore.