Differences have emerged between corporates and their associations on the one side and non-banking finance companies (NBFCs) and microfinance institutions (MFIs) on the other over the Reserve Bank of India's (RBI) discussion paper on 'Entry of New Banks in the Private Sector'.
Generally, the industry federations and banks have favoured a high start-up capital of Rs 1,000 crore, which could be raised up to Rs 1,500-2,000 crore over a period of time, while NBFC/MFI sector preferred a lower start-up capital ranging from Rs 300 to Rs 500 crore, RBI said in its gist of the views of various stakeholders released on Thursday about its discussion paper.
The RBI had placed the discussion paper on its website on August 11, 2010 to seek the views of various stakeholders. In the responses received by the RBI, industry associations buttress their argument citing that the new banks would require high investments in technology for financial inclusion, and to scale up operations to be viable. Higher level of minimum capital would also ensure that only serious players with long term vision could enter the banking sector, they contended.
On the other hand, NBFCs and MFIs argue that with Rs 300-500 crore capital, about 30- 40 banks could be licensed within a period of five to 10 years with dedicated focus on financial inclusion. They also proposed that the RBI give licences to about 20 new banks with minimum capital of Rs 50 crore and a capital to asset ratio of not less than 15 per cent.
Other issues discussed in the paper were minimum and maximum caps on promoter shareholding and other shareholders; Foreign shareholding in the new banks; Whether industrial and business houses could be allowed to promote banks; Should NBFCs be allowed conversion into banks or to promote a bank and business model for the new banks.
Detailed discussions on the above issues were held on October 7 and 8, 2010 with associations of stakeholders from the industry, banks, NBFCs and MFIs and some consultants, including CII, Assocham, Ficci, IBA, RRBs Officers' Federation, FIDC, MFIN, Ernst & Young, and Pricewaterhouse Coopers.
Courtesy: Mail Today
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