RBI panel draft guidelines positive for banking sector, IIFL Group Founder tells Anil Singhvi

In an exclusive chat with Zee Business Managing Editor Anil Singhvi, Nirmal Jain, Founder and Chief Executive Officer (CEO) of IIFL group talks about group’s chances of becoming a bank. The draft guidelines from the working group of the Reserve Bank of India (RBI) have given a fresh impetus to the group’s chances of turning into a bank.

Jain said that as per the guidelines of the banking regulator, those NBFC’s will be eligible to become a bank whose loan assets are above Rs 50,000 cr. The group’s loan assets are currently around Rs 40,000 cr, he added.

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The group is still not eligible and there is still some time for that to happen, he further said.

Nirmal Jani’s top points of RBI recommendations:
There are many good things about the guidelines, he said adding that the banking guidelines in India are not complicated. He said that former Finance Minister Pranab Mukherjee during his tenure had voiced for giving more bank licenses to deal with the growing economy. Unfortunately, not many banks have emerged over the last 12 years, he lamented.  

These guidelines have a capital-based focus. The minimum requirement of Rs 1000 cr is a pragmatic move. Capital-based focus for banks is a global practice, the CEO said. This is a Smaller banks often face difficult situations and people are also not get scared on any eventuality.  

The bank has also clarified guidelines on promoter and non-promoter shareholdings, which is a good step.

The new guidelines also aim to create a level playing field, he said.

For NBFC’s a Rs 50,000 cr limit is a good threshold.  

In the Indian context, a corporate is needed, and PSU banks have not been able to raise capital. If th banking sector is to be strengthened, then a lot of new banks will have to be introduced, Jain said.

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For the country to realise its USD 5 trillion dream, it would need 10-20 new banks over the next 5 years. These banks are required to finance the economy.