Shares of major NBFCs today zoomed as much as 14 per cent after the Reserve Bank released the much awaited discussion paper on granting banking licenses to private players and non-banking finance companies.
Financial services provider Religare Enterprises led the gains and soared 13.8 per cent to hit a year high of Rs 472.70 on Bombay Stock Exchange. The company is among the entities like Reliance Capital, IndiaBulls, IL&FS, IDFC, IFCI and Aditya Birla Nuvo, that are reported to be mulling entering the banking space.
Bajaj Auto Finance jumped 3.2 per cent to touch a year high of Rs 622.50, while Anil Ambani-led Reliance Capital climbed 4.7 per cent to Rs 795. Domestic financial institutions IFCI and IDFC also witnessed an upsurge of 5 per cent and 1.6 per cent respectively.
"The market sentiment went up after the RBI's proposal. Banking licence will be a sure shot way of making money. There will be a lot of wealth creation as it will be like RBI distributing gold to the contenders." SMC Capitals equity head Jagannadham Thunuguntla said.
Aditya Birla Nuvo, which is a Birla group firm with a strong presence in financial services, rose 1.38 per cent to Rs 818. Bajaj Auto Finance jumped 3.2 per cent to touch a year high of Rs 622.50.
As per market information, these players have firmed plans to enter the banking sector after Finance Minister Pranab Mukherjee mentioned in the Union Budget 2010-11 that fresh licences would be issued to private firms and NBFCs.
The RBI today released a discussion paper on giving new banking licenses and formulating regulations for the same to foster greater competition.
"The Reserve Bank is considering providing licenses to a limited number of new banks. A larger number of banks would foster greater competition, and thereby reduce costs and improve the quality of service," the central bank said in a discussion paper.
The RBI also sought to know "whether industrial and business houses could be allowed to promote banks". And, should NBFCs be allowed to convert into or promote banks.
The central bank has sought feedback on this as also business model for the new banks by September 30.