Antique Stock Broking Ltd., an India-based financial services conglomerate, reportedly has projected that L&T Finance Holding, Shriram Group and Mahindra & Mahindra Financial Services are the three non-banking financial companies (NBFCs) most likely to receive banking licenses shortly from the Reserve Bank of India (RBI). Other contenders include Bajaj Finserv, Aditya Birla Nuvo and Tata Capital. Banking licenses allow NBFCs to provide services such as accepting demand deposits and issuing checks as well as participating in the payment and settlement system and facilitating deposit insurance operations.
RBI’s decision will be based on parameters including financial inclusion, management quality, lending to government-identified priority sectors, track record, diversification of ownership and business plan quality.
RBI is slated to issue additional banking licenses upon the approval of the Banking Laws (Amendment) Bill, which is currently being reviewed by Parliament for possible amendment to permit banks to trade in commodity futures.
By Jennifer Young, Research Associate
About Reserve Bank of India (RBI)
Established in 1935, the Reserve Bank of India (RBI) undertakes consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies (NFBCs). The current focus of RBI is to supervise financial institutions, consolidate accounting standards, resolve legal issues in cases of banking fraud, monitor non-performing assets and supervise the rating model for the banking sector. In 1979, the National Bank for Agriculture and Rural Development (NABARD) was formed at the behest of RBI to provide regulatory oversight to regional rural banks (RRBs) and to promote the development of agricultural lenders: tasks that had been the responsibility of RBI. While non-banking financial companies such as for-profit microfinance institutions operate under RBI regulations, the responsibility for inspecting agricultural lenders, RRBs, state cooperative banks, district central cooperative banks and state cooperative agricultural and rural development banks was transferred to NABARD. RBI maintains these responsibilities for for-profit MFIs. Although RBI was originally the parent organization of NABARD and until October 2010 held a 72.5 percent stake in the outfit, RBI owns a one-percent stake in NABARD as of 2011.
RBI’s reserves stood at USD 302 billion at the end of 2011.
About Antique Stock Broking Ltd.
Antique Stock Broking Ltd. Is an India-based financial services conglomerate that specializes in equities and derivatives broking, investment banking, wealth management and research. Anish Jhaveri serves as the Chief Executive Officer of Antique AS OF 2012. Financial data on Antique Stock Broking Ltd. is unavailable.
About the L&T Finance Holding:
Founded in 1994, L&T Finance Holding is a non-banking financial institution registered with the Reserve Bank of India. It acts as a financial holding company offering products and services across the corporate, retail and infrastructure finance sectors including mutual fund products and investment management services. Under its parent company, Larsen & Toubro Limited (L&T), L&T Finance Holding operates wholly-owned subsidiaries including L&T Finance, L&T Infra and L&T Mutual Fund. L&T is headquartered in Mumbai and operates in 23 states in India. In September 2011, Y.M. Deosthalee assumed the position of Chairman and Managing Director of L&T Finance Holdings and continues to serve at that capacity as of December 2012. As of March 2012, L&T Finance Holding reported total assets of INR 110.9 billion (USD 2 billion).
About the Shriram Group:
The Shriram Group is an Indian provider of financial and non-financial services to low-income clients. The group’s principal financial product lines include transport finance, consumer lending and insurance, which are housed under Shiram Capital. Shriram Group has also made a number of investments in non-financial sectors that include information technology, infrastructure and medical diagnostics. As of 2011, Shriram Capital reported assets under management of approximately INR 400 billion (USD 8.65 billion).
About Mahindra & Mahindra Financial Services Limited
Mahindra & Mahindra Financial Services Limited (Mahindra Finance), part of India’s Mahindra Group, is a non-bank financial service company. It provides insurance coverage to rural and semi-urban markets in India. With a staff of 9,700, it also provides finance for vehicles and farm equipment. As of March 2012, Mahindra Finance reports total assets of INR 1.86 trillion (USD 35.8 billion), return on assets of 3.34 percent, return on equity of 2.1 percent and serves approximately 200,000 customers. Mahindra Finance also reports deposits of INR 10.6 billion (USD 205 million) held for 85,000 depositors.
Sources and Additional Resources
Money Control Story: “3 NBFCs likely to get RBI nod for banking license: Antique”
MicroCapital Story: “MICROCAPITAL BRIEF: SKS Microfinance of India Announces $36m Securitization Under Amended Reserve Bank of India Guidelines,” December 2, 2012.
MicroCapital Story: “MICROCAPITAL BRIEF: LeapFrog Takes 15% Stake in Mahindra Insurance Brokers for $15m in Effort to Boost Impact in Rural India,” October 8, 2012.
MicroCapital Story: “MICROCAPITAL BRIEF: Indian Microfinance Institution Bandhan Financial Services to Apply for Banking License,” September 20, 2011.
MicroCapital Universe Profile: Reserve Bank of India (RBI)
MicroCapital Universe Profile: Antique Stock Broking Ltd.
MicroCapital Universe Profile: L&T Finance Holding
MicroCapital Universe Profile: Shriram Group
MicroCapital Universe Profile: Mahindra & Mahindra Financial Services Limited
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