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India Equity Research Reports, IPO and Stock News
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RBI announced the draft guidelines for new bank licenses today.
Corporates have been allowed to bid for licenses vs recent speculation
that they might not be eligible. NBFCs have also been allowed to bid, but
the proposed holding structure could lead to some challenges. This is
negative for brokers (Edelweiss/Religare), PSU FIs (PFC/REC) and real
estate aspirants as they have been excluded. Although draft guidelines
have been announced, the process of granting licenses will be a long one.
Corporates eligible: RBI has made a significant break from the past and
allowed corporates to apply for licenses. The corporate ownership will
have to be funneled through an NOHC (holding company) regulated by
the RBI. We see this as positive for most corporate aspirants (mentioned
below). The guidelines are silent on whether the new applicants can buy
existing banks, but if allowed would be very positive for small private
banks as they could become attractive targets.
NBFCs allowed to bid, but holding structure could pose some
challenges: NBFCs can also apply for licenses but, given the holding
restrictions proposed, NBFCs would have to merge all existing financing
businesses into the new bank. This could be positive for SHTF, MMFS
and other NBFCs, but multiple financing businesses of the Shriram
group may create some challenges.
Real estate, brokers and PSUs not eligible: While real estate exclusion
was largely expected, there has been some debate on PSUs and brokers
eligibility. We see this as negative for brokers such as
Edelweiss/Religare and also for PSU FIs such as PFC/REC.
Other highlights: (1) Minimum shareholding of 40% for first five years.
To be scaled down to 20%/15% in 10/12 years. (2) 49% FII ownership in
the first five years, after which it can go to 74%. (3) For corporates,
lending to promoter-related single entity and group exposure restricted to
10% and 20% of networth. (3) Stiff financial inclusion targets proposed
with 25% of branches to be opened in rural areas without banks.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
RBI announced the draft guidelines for new bank licenses today.
Corporates have been allowed to bid for licenses vs recent speculation
that they might not be eligible. NBFCs have also been allowed to bid, but
the proposed holding structure could lead to some challenges. This is
negative for brokers (Edelweiss/Religare), PSU FIs (PFC/REC) and real
estate aspirants as they have been excluded. Although draft guidelines
have been announced, the process of granting licenses will be a long one.
Corporates eligible: RBI has made a significant break from the past and
allowed corporates to apply for licenses. The corporate ownership will
have to be funneled through an NOHC (holding company) regulated by
the RBI. We see this as positive for most corporate aspirants (mentioned
below). The guidelines are silent on whether the new applicants can buy
existing banks, but if allowed would be very positive for small private
banks as they could become attractive targets.
NBFCs allowed to bid, but holding structure could pose some
challenges: NBFCs can also apply for licenses but, given the holding
restrictions proposed, NBFCs would have to merge all existing financing
businesses into the new bank. This could be positive for SHTF, MMFS
and other NBFCs, but multiple financing businesses of the Shriram
group may create some challenges.
Real estate, brokers and PSUs not eligible: While real estate exclusion
was largely expected, there has been some debate on PSUs and brokers
eligibility. We see this as negative for brokers such as
Edelweiss/Religare and also for PSU FIs such as PFC/REC.
Other highlights: (1) Minimum shareholding of 40% for first five years.
To be scaled down to 20%/15% in 10/12 years. (2) 49% FII ownership in
the first five years, after which it can go to 74%. (3) For corporates,
lending to promoter-related single entity and group exposure restricted to
10% and 20% of networth. (3) Stiff financial inclusion targets proposed
with 25% of branches to be opened in rural areas without banks.
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