Early implementation of RBI panel proposals will give us time to list: SFBs

Early implementation of the Reserve Bank of India panel’s recommendation on small finance banks (SFBs) will give more time to list shares on exchanges. It will also provide breather to get business hit by the Covid-19 pandemic back on track, SFBs executives said.
 

The steps mooted by the RBI’s internal working group headed by P K Mohanty may not impact regulations concerning SFBs in the short term. Banks have to assume current guidelines are operational and work according to them. It is not clear how quickly these recommendations will be implemented. The time lines for listing are very close for most of SFBs.
 

The Mohanty panel said existing SFBs and payments banks should be listed within six years from the date of reaching net worth of Rs 500 crore or 10 years from the date of commencement of operations, whichever is earlier.
 

The RBI guidelines of prescribe mandatory listing for SFBs within three years of reaching with net worth of Rs 500 crore. They could voluntary list for even before when net worth is less than Rs 500 crore. Most of SFBs are governed by these rules.

 

A chief executive of SFB said some of the small banks have sought RBI’s permission to defer the IPO by six months because the business was hit by the pandemic. “This request was made about three–four months back. We would first wait to hear on this and then take a call on listing, though some of us have already completed significant part of the IPO preparation,” said another CEO of SFB, which is due to list in the next year.
 

“If the RBI responds positively and by that time we also have the final norms of the Mohanty committee report, then it makes sense for SFBs to take advantage of the deferring the listing. We would get another three-year window in that process,” he said. The pandemic–caused disruption is more scathing than demonetisation. The entire FY22 year will go in recalibrating the business and building the balance sheet.
 

Rajeev Yadav, MD and CEO of Fincare Small Finance Bank, said these recommendations were helpful but the timing of them getting finalised was critical as current regulations expected SFBs to list lot faster.
 

K Paul Thomas, MD and CEO of ESAF SFB, said: “Right now, it’s only at a draft stage. So the board will deliberate on it and take a call on when the final norms come out. If the time for listing indeed gets extended, we may likely avail that benefit.”