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Mumbai 10 minutes ago
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There are 9601 NBFCs in the country. The annual growth rate of NBFCs has been 18.6% between March 31, 2009 to March 31, 2019. While the commercial bank grew by 10.7% during this period. The total balance sheet size of NBFC is 18.6% of the total balance sheet size of commercial bank
- The recommendation states to make Payments Bank a small finance bank.
- This will benefit companies like Paytm which do business in Payments Bank
Reserve Bank of India (If the RBI accepts the recommendation of its internal working group, then the path for non-banking financial companies (NBFCs) to become banks will become easier. In such a situation, Mahindra & Mahindra and Bajaj Finance will be the leading contenders. While Payments Banks like Paytm can also become small finance banks.
This would be because they are NBFCs of all corporate houses and follow the rules. This working group was established on 12 June 2020.
Bajaj’s AUM of Rs 1.15 lakh crore
The Asset Under Management (AUM) of Bajaj Finance has been Rs 1.15 lakh crore in FY 2019. Its total income has been Rs 18,502 crore. The net profit has been Rs 3,995 crore. It has 1803 branches of which more than 900 branches are in rural India. Mahindra & Mahindra Financial Services’s AUM stood at Rs 81,436 crore in the first quarter of the current financial year. Its net profit for the quarter was Rs 156 crore. It has about 1300 branches.
Trying to make banking rules easier
Explain that in the recommendation of RBI Working Group, it has been said that banking rules should be simplified. Accordingly, a well-run NBFC may get this opportunity. NBFCs that have been in business for 10 years may be eligible. For such NBFCs, at least their size should be 50 thousand crores. They can be in the form of a full-flanged bank themselves.
9,601 NBFCs in the country
There are 9601 NBFCs in the country. The annual growth rate of NBFCs has been 18.6% between March 31, 2009 to March 31, 2019. While the commercial bank grew by 10.7% during this period. The total balance sheet size of the NBFC is 18.6% of the total balance sheet size of the commercial bank. In March 2009 it was just 9.3%. RBI’s IWG said, as on 31 March 2020, the asset size of NBFC has been more than Rs 51 lakh crore.
Corporate structure review
The objective behind the creation of this working group was to review the guidelines and corporate structure of the Indian private sector bank. According to the recommendation of this working group, large industrial houses can be approved as promoters of the bank. For this, the Banking Regulation Act 1949 will need to be changed. Also, the supervisory mechanism will need to be strengthened.
Share discount recommendation
The RBI committee recommended promoters of private banks to give up to 26% stake in equity shares of the bank. The RBI panel also suggested that the cap for promoters on the bank’s paid-up voting equity share capital for more than 15 years be increased from 15% to 26%. .
Payments banks can also be small finance banks.
Apart from these, the IWG has recommended that given three years of track record and experience, Payment Banks can be converted into Small Finance Banks (SFBs). At the same time, SFBs and Payment Banks can be listed on the stock market within 6 years of reaching universal bank net worth or if they are operational for 10 years.
Starting capital one thousand crores
The RBI’s IWG suggested that the initial capital for licensing a new bank should be increased from at least Rs 500 crore to Rs 1,000 crore. At the same time, for Small Finance Bank it increased from Rs 200 crores to 300 crores rupees.