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Media sources (ET) reported that new bank license norms will be issued
next week. The news report indicates that these will be the final norms,
and will set the stage for new licenses to be issued. While there is no
official confirmation of this, we highlight the key issues that the guidelines
could address:
Corporates's eligibility – the most important issue: If the new norms
do rule out the corporate from the scope of the eligible, the universe of
potential bidders could dramatically shrink.
Number of licenses issued: We are not sure whether the new licenses
will be issued to everyone who meets a base criteria or selectively. We
doubt that there would be an open auction.
Foreign ownership: The same article mentions that the debate among
policymakers is the foreign ownership limit. The choices are to allow
74% ownership right away, or 49% for an initial period and 74% later.
Financial inclusion targets: The new licensees will set stricter
inclusion targets (i.e., more branches in rural areas) than existing
players. The extent of these targets will be closely watched.
Make vs. buy: There is some debate on whether the new licensees will
be asked to set up new banks, buy new banks or in case of NBFC
bidders, be asked to convert to banks. The last will be a deterrent for the
existing players. If the mandate is to buy existing banks, the valuations of
the “old private sector banks” could move up.
We believe the new bank licenses would be positive for two sets of
companies though the final guidelines would determine the extent of
positive impact: (1) Potential bidders as a potential bank license could
propel growth trajectory. Beneficiaries could be corporate houses and
financial companies mentioned below, (2) Potential targets – mainly old
private sector banks if RBI allows new licensees to buy existing banks.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Media sources (ET) reported that new bank license norms will be issued
next week. The news report indicates that these will be the final norms,
and will set the stage for new licenses to be issued. While there is no
official confirmation of this, we highlight the key issues that the guidelines
could address:
Corporates's eligibility – the most important issue: If the new norms
do rule out the corporate from the scope of the eligible, the universe of
potential bidders could dramatically shrink.
Number of licenses issued: We are not sure whether the new licenses
will be issued to everyone who meets a base criteria or selectively. We
doubt that there would be an open auction.
Foreign ownership: The same article mentions that the debate among
policymakers is the foreign ownership limit. The choices are to allow
74% ownership right away, or 49% for an initial period and 74% later.
Financial inclusion targets: The new licensees will set stricter
inclusion targets (i.e., more branches in rural areas) than existing
players. The extent of these targets will be closely watched.
Make vs. buy: There is some debate on whether the new licensees will
be asked to set up new banks, buy new banks or in case of NBFC
bidders, be asked to convert to banks. The last will be a deterrent for the
existing players. If the mandate is to buy existing banks, the valuations of
the “old private sector banks” could move up.
We believe the new bank licenses would be positive for two sets of
companies though the final guidelines would determine the extent of
positive impact: (1) Potential bidders as a potential bank license could
propel growth trajectory. Beneficiaries could be corporate houses and
financial companies mentioned below, (2) Potential targets – mainly old
private sector banks if RBI allows new licensees to buy existing banks.
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