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Sebi’s scrutiny follows detailed queries shot off by RBI to various regulators in India and abroad as a part of its due diligence of entities seeking to enter banking arena.
According to a senior official, Sebi is looking into the capital market record of all the group entities of 26 banking aspirants, some of whom are either listed entities or have presence in Sebi-regulated businesses like mutual funds, brokerage and investment banks.
The area of prime focus for Sebi was action taken by or underway for violations to various market regulations, he added. The scrutiny is expected to be over this month itself.
RBI is granting new bank licences for the first time in about a decade and preliminary screening process is underway for 26 entities that have submitted their applications. As part of this process, the banking regulator has also asked the applicants to provide further details about their promoters, equity structure, financial inclusion programme, proposed banking model, among others, sources said.
In addition to Sebi, RBI is also seeking details from other regulators such as Insurance Regulatory Authority of India and Pension Fund Regulatory and Development Authority about the businesses of the applicant entities under their respective jurisdictions.
With regard to some applicants, RBI has sought to know details about source of funds and compliance to the structural norms proposed for new banking players.
Besides, RBI is seeking additional details from the concerned foreign regulators about those applicants whose group entities have operations, significant business dealings with foreign companies or listings abroad. Sources said this due diligence process involves information exchange with domestic and foreign regulatory authorities for all group entities of the applicants.
RBI has also set up an expert panel to look into the applications. Headed by former RBI Governor Bimal Jalan, this committee includes RBI's former Deputy Governor Usha Thorat, Sebi's former Chairman C B Bhave and financial sector expert Nachiket Mo. This panel held its first meeting on November 1.
RBI's board will take a final decision on new licences after taking into account the panel recommendations. The names of successful entities are expected by January 2014.
The applicants include entities from large corporate houses like Tatas, Anil Ambani-led Reliance Group, Kumar Mangalam Birla-headed Aditya Birla Group, L&T, Bajaj, SREI, Religare and Indiabulls. Besides, Department of Post, IFCI, LIC Housing Finance, JM Financial, Muthoot Finance, Edelweiss, IDFC, India Infoline and Shriram Capital are also in the fray. In the past 20 years, the RBI has licensed 12 banks in the private sector in two phases, with Kotak Mahindra Bank and Yes Bank being the last two entities to get banking licences in 2003-04.
