Almost a month after the Reserve Bank of India (RBI) put out the list of non-banking finance companies to be classified in the upper layer under the scale-based regulations, some of the large NBFCs led by conglomerates have reached out to the regulator seeking clarity on what they should do to simplify their ownership structures, reported Business Line.
Some of the non-banks which showed interest in the past to secure a bank license are said to have approached the regulator.
Some of the names doing the rounds are Cholamandalam Financial Holdings, Shriram Group, Mahindra and Mahindra Financial Services and Bajaj Finserv.
“We would not like to comment on speculation. We have always maintained that we will closely look at it when the opportunity arises,” said the company spokesperson of M&M Finance.
Currently, the shareholding structures of these companies are quite complex, especially at their respective holding company levels. “Even if they qualify to become banks as more than 40 per cent of the group revenues are generated by financial services businesses, the complex shareholding may be an impediment for most of them,” said a highly placed source aware of the matter.
Until a year-ago, the prohibitive requirement of setting aside funds towards cash reserve ratio and statutory liquidity ratio were the main deterrents for NBFCs to convert to banks. “Now the industry will closely watch the kind of exemption and grandfathering that RBI will allow for the merger of HDFC Limited and HDFC Bank,” said another source.
At least 2-3 NBFCs categorised in the upper layer are keen to convert to banks, a source reveals. “The RBI is also very keen about it, though it could take 1-2 years to see the outcome,” said an industry expert closely engaged with NBFCs.