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Having failed to earlier get a universal banking licence, the Chennai-based Shriram Group, which has a cluster of companies offering financial services, is now keen to apply for a small bank licence or a wholesale consumer banking one. Only, though, if it means they can carry on with their existing business.
“We have written to the Reserve Bank of India (RBI) if one promoter can float multiple banks with different managements and different boards,” said G S Sundararajan, group director. “In case it is allowed, we would be keen to look at wholesale consumer banks and small banks as well.”
In a major shift in its traditional stance on bank licensing, RBI has said it would allow niche banking activities and invite applications for differentiated licences, along with those for a universal lender. It has already issued proposed norms on payment banks and small banks.
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The Nachiket Mor panel’s report on comprehensive financial services for small businesses and low income households has talked about wholesale consumer banks and wholesale investment banks. Draft guidelines on the latter bank are yet to come out. Sundararajan said if guidelines on wholesale consumer banks don’t hamper the current operations of the group’s businesses, they’d be more keen on this as compared to other differentiated banks.
The Rs 76,000-crore group is keen to get into the banking space, as it believes this is a gap in what it offers. Its hurdle is that RBI norms mandate converting an existing non-banking finance company (NBFC) into a bank, for no other entity in a group is allowed to offer products that a bank can. In the previous round of applications for a (universal) banking licence, Shriram Capital had told RBI towards the end that it was not comfortable with the regulation which mandated the merging of Shriram Transport Finance Corporation and Shriram City Union into the bank, in case a licence was granted.
Apart from the promoter status, the company has asked for some more clarifications on small banks. “For instance, we have asked what geography we should look at. The draft also said you will have to ring-fence the NBFC operation in that particular geography; what exactly does that mean? Does it mean we cannot do any more business there or we can do so in both the entities separately?” added Sundararajan.
He said there’d also been issues regarding the provisioning norms and the area of operations. “Why should we have SLR (statutory liquidity ratio), CRR (cash reserve ratio) requirements when we will be a financial inclusion bank? And, if it is going to cater to the priority sector for 50-60 per cent, why should there be SLR, CRR requirements anyway? Similarly, what are the geographies that can be covered by small banks? It says contiguous district/states — does it mean contiguous district and states or does it mean either districts or states?” he asked.
The group is very clear that it will apply for a licence only if their existing business is not hampered.”If we have to transfer our existing business into banks, it does not work for us. This will mean depriving our customer of credit for a considerable period of time till we build our deposit base,” explained Sundararajan.
