New banking norms fuel smart rally by NBFC scrips
Shares of non-banking finance companies (NBFCs) like Bajaj Finserv, Reliance Capital, Mahindra & Mahindra Financial Services and Srei Infrastructure Finance have rallied for the second day in a row after the Reserve Bank of India (RBI) releases draft guidelines for licensing of new banks in the private sector.
The aforementioned existing NBFCs, if considered eligible, may be permitted to either promote a new bank or convert themselves into banks.
In its much-awaited draft guidelines for new private banks released on Monday, the RBI said private groups or entities with diversified ownership, sound credentials and a “successful track record" of 10 years would be allowed to apply for new banking licences. The central bank is considering issuing banking licences for the first time since 2004.
Among individual stocks, Bajaj Finserv is the largest gainer, up 9 per cent at Rs 625 on the BSE and it has gained 25 per cent in past two trading days from Rs 500 on Friday, August 26.
Srei Infrastructure Finance is up 7 per cent at Rs 42.30, followed by Mahindra & Mahindra Financial Services (up 5 per cent) and Reliance Capital (up 4 per cent).
The new banks can be set up only through a wholly owned, non-operative holding company, or NOHC, that will control the bank and other financial service companies in the group, the RBI said. The NOHC, which will be registered as a non-banking finance company with the RBI, will include all financial arms of the founding group.
“The minimum capital requirement will be Rs 500 crore and the aggregate foreign shareholding in the new bank shall not exceed 49 per cent for the first 5 years after which it will be as per the extant policy," the RBI said in a press release.
According to experts, the objective of the draft guidelines is to create greater harmony between NBFCs and banks and also remove the regulatory hurdles that NBFCs were facing. In this context, IDFC Managing Director & CEO Rajiv Lall said,“.... we have tried to find a balance between dealing with potential systemic risk issues in the NBFC sector while encouraging the companies to exploit their competitive advantages to deliver services that other financial services companies are not able to.”
Further, Lall indicated that IDFC will review the norms to procure banking license and if it makes business sense, then they will consider converting to a banking organization. However, their core focus is infrastructure funding, which is vastly different from a general bank, he added.
Sensex up 260 pts on firm global trend
Mumbai, pti: The BSE Sensex shot up 260 points to 16,676.75, as investors ignored weak economic growth numbers and bought stocks at lower levels in line with strong trend in overseas markets as US consumer spending data ignited hopes of global economic recovery.
There was strong buying by foreign funds in metals, realty, banking and IT. The Bombay Stock Exchange 30-share index, Sensex, which gained 567.50 on Monday, rose 260.42 points or 1.59 per cent to 16,676.75. Intra-day, it touched a high of 16,714.70. Similarly, broad-based National Stock Exchange index Nifty rose 81.40 points or 1.65 per cent to close above the 5k level at 5,001.
