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Chandigarh-based KC Land & Finance has recently been added by the Reserve Bank of India in the list of names that had applied for a banking licence, three months after the cutoff date. Prem Pal Gandhi, chairman of the diversified Rs 1,000-crore KC Group, talks to Vijay C Roy on the rationale behind the banking foray and other plans.
Why should KC Land & Finance get a bank licence?
Many villages are either unbanked or underbanked. We are from a rural background and have a strong foothold in the rural market, so we wish RBI grant us a licence. It would be a social cause and also strengthen group activities. With the rollout of central schemes such as Direct Benefits Transfer, the role of the banking sector became more evident and that is where the opportunities are.
RBI said it 'inadvertently' missed the company's name while releasing the applicants list on July 1. Why did rectifying it take three months?
We pointed out the exclusion four to six days after the first list was released. We also sent two reminders. We had planned to meet RBI officials if they did not consider our application.
What are the finance-related activities you are engaged in? Do you already have a non-operative financial holding company structure in place?
In the early 90s, we were actively involved in finance-related activities. We do have a non-operative financial holding company, called Indigo Fincap (P) Ltd, incorporated in 1995, which adheres to the requirement.
RBI proposed a minimum capital requirement of Rs 500 crore. How do you plan to raise the funds for this and for further capital infusion?
According to RBI norms, for the first three years the minimum capital requirement is Rs 200 crore. The initial requirement would be met through internal accrual, associate companies, friends, relatives and foreign direct investment. Future requirements would follow the same pattern.
How do you plan to meet the financial inclusion norms that RBI has laid down? How do you plan to extend your reach?
I am from a rural background and live in a small city, Nawanshahr, in Punjab. We are very much attached to our roots and have very good reputation in Nawanshahr and surrounding areas. Since our plan is to initially focus on the rural sector and microfinance, this will help us to meet the financial inclusion norms. Besides opening bank branches in rural areas, we will appoint business correspondents to reach every individual.
What will be the business plan? Do you want to be an all- service lender or would the focus be on niche segments and customers?
We have appointed Vikas Sharma, a chartered accountant, as chief executive of the proposed bank, KC Bank of Doaba, who will take care of the new entity. We are foraying into the banking sector with a philanthropic purpose. As mentioned earlier, our focus will initially be rural and micro finance. Later, we might extend to semi-urban and urban areas.
Your group activities?
We have three verticals — hospitality, real estate and educational institutes. In the hospitality arm, the group owns three hotels — Pride KC Hotel & Spa (the only 5-star property in Panchkula), KC Residency in Chandigarh and KC Cross Roads in Panchkula. We have seven colleges and a school in Nawanshahr. We also run six colleges and a school in Himachal Pradesh. Besides, we are coming up with a new hotel in Chandigarh, with a total project cost of Rs 85 crore, group housing in Mohali (Rs 100 crore) and cottages in Kasauli (Rs 400 crore). We also have plans to set up a hospital, for which talks are on with a leading hospital chain.
