NBFCs feel they are a better option for getting a bank license
By Joseph Samson
Oct 8, 2010
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Non banking finance companies (NBFCs) feel that they are in a better position to receive banking licenses than corporate houses who are their major competitors in the race. They have also discussed this with Reserve Bank of India emphasizing their competency on the fact that they are used to do business and run under RBI guidelines and regulations.

Corporates give their stand saying that they have experience and strong presence in financial sector and thus they should be given bank license.

This issue was discussed in a meeting held on Thursday. Three RBI deputy governors - Usha Thorat, KC Chakrabarty and Subir Gokarn - were present in the meeting. Five prominent NBFCs - Mahindra & Mahindra Finance, Indiabulls Financial Services, Reliance Capital , Srei and Sriram Transport - attended the meeting which was led by FIDC.

"We have pointed out to RBI that NBFCs who are asset financing with good track record are better placed to run a bank than a corporate house. Secondly, NBFCs are competent because unlike corporates, they are familiar with RBI regulations," said Mahesh Thakkar, director general of Finance Industry Development Council.

"Policymakers should be clear on what their concerns are and address them accordingly, rather than take a carte blanche view. If the concern is that public deposits would be at risk, they should address that. If the fear is of group lending, there can be measures such as higher risk weightage to discourage such loans," said Ernst & Young national director Viren Mehta.


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