Wednesday, 27 November 2013

Tata Group exits banking race, withdraws application for bank licence

The Reserve Bank of India  today said that Tata Sons  has withdrawn its application  for a new bank licence. After Videocon, Tata Group is the second conglomerate to withdraw its application. Tata Sons has indicated that its current financial services operating model best supports the needs of the Tata Group’s domestic and overseas strategy, and provides adequate operating flexibility to its companies, while securing the interests of the Group’s diverse stakeholder base. Given Tata’s track record and the fact that people would ideally trust their money with such a large conglomerate, it is surprising that the Tata Group is exiting the race for a banking licence. Capital coming in from large corporates was seen as a positive for the sector. But now with such a large conglomerate exiting from the race, the shape of banking reforms is changing, said Ashwin Parikh of E&Y  in an interview with CNBC- TV18. Moreover, unlike many countries, permission for setting up banks isn’t given easily. For starters, minimum equity capital of Rs 500 crore is a must-have. RBI also requires that 25% branches opened be located in “unbanked” rural areas – typically those with a population less than 10,000. Although this rule is targeted to achieve financial inclusion, it means that deposit growth would be slow in a quarter of the branches

Sandip Ginodia , Director

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