RBI guidelines for new bank licenses positive for real estate and brokerage companies - Aditya Birla Money

RBI releases final guidelines for new bank licenses - Dropping of restrictive clauses w.r.t. entities with income or assets of 10% or more from real estate construction and broking activities is beneficial for leading brokerages and players with sizeable real estate operations. The new guidelines are also likely to trigger fresh interest in likely takeover targets. Positive for South Indian Bank, City Union Bank, India Infoline, Religare, SREI Infra, etc. Other strong contenders in the race are LICHF, IFCI, M&M Finance, Reliance Capital, L&T Finance, AB Nuvo, Bajaj Finance, PFC, Shriram Finance.

The Reserve Bank released the final guidelines for issuing of new banking licenses. Unlike the draft guidelines wherein the RBI had expressed reservations about allowing realty players, brokerages and state-run enterprises into the fray, there is no such explicit mention in the final guidelines. Key features of the guidelines are - a) key Entities/groups in the private sector, entities in the public sector and NBFCs shall be eligible to set up a bank through a wholly-owned non-operative financial holding company (NOFHC), b) the NOFHC shall initially hold a minimum of 40% of the paid-up voting equity capital of the bank which shall be locked in for a period of five years and which shall be brought down to 15% within 12 years, c) the bank shall get its shares listed on the stock exchanges within three years of the commencement of business, d) new banks will have to set up 25% of its branches in unbanked rural areas, e) the final guidelines sets 49% cap on foreign holding in new banks and minimum paid-up equity capital at Rs 5 bn, f) existing NBFCs, if considered eligible, may be permitted to promote new banks or convert themselves into banks, g) Entities/groups should have a past record of sound credentials and integrity, be financially sound with a successful track record of 10 years. For this purpose, RBI may seek feedback from other regulators and enforcement and investigative agencies, h) July 1 is the last date for making the applications.

Source : Equity Bulls

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