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IDFC, Bandhan gets RBI nod to set up new private banks

Thursday, 3 April 2014 - 6:10am IST | Place: Mumbai | Agency: dna

Among the other 22 applicants in the fray which did not qualify this time were Anil Ambani group, Aditya Birla, Bajaj Finance, Muthoot Finance, Religare Enterprises and Shriram Capital to name a few. Initially, about 27 companies had approached the RBI in July 2013 seeking licences. Subsequently, Tata Sons and Videocon Group withdrew, leaving 25 contenders in the fray.

Armed with an in-principle approval from the Reserve Bank of India (RBI), Mumbai-based infrastructure lender IDFC Ltd and Kolkata-based micro financier Bandhan Financial Services Pvt Ltd are all set to begin the process to roll out new private banks in the country.

Speaking to dna, Rajiv Lall, executive chairman of IDFC, said his company has plans to build a universal bank that will cater to the entire gamut of retail and wholesale banking business.

Vikram Limaye, managing director and CEO, said the bank would be headquartered in Mumbai and plans were already in place, but it was a bit premature to comment further.

The central bank has given both IDFC and Bandhan 18 months to set up their banks.

On the number of employees IDFC would need for the new bank, Limaye said: "We were not hiring so far as we were awaiting the licence approval. We would now aggressively look at hiring people. Right now we have about 500 staffers and the bank would be a subsidiary."

Limaye, however, wasn't forthcoming on the number of people he would require for the new set-up.

Chandra Shekhar Ghosh, chairman and managing director of Bandhan Financial Services, told dna that the company is largely focused on unbanked areas across 22 states and into the business of financial inclusion.

"So far, we have been giving only credit to the rural poor. We can now hope to give our 54 lakh client-base the entire services of a bank," he said.

Ghosh did not specify on the number of branches he would add but said the current 2,016 micro finance outlets do not qualify for a bank branch.

The two applicants were recommended 'suitable' for the in-principle approval by the High Level Advisory Committee (HLAC) set up by the RBI.

With regard to the application of the Department of Posts, the RBI accepted the recommendation of the high-level screening committee to take further action in consultation with the government.

The RBI had earlier clarified that licences would be made available on tap.

Both IDFC and Bandhan will set up banks under the Guidelines on Licensing of New Banks in the Private Sector issued on February 22, 2013.

According to Abizer Diwanji, head of financial services, E&Y, retail banking itself is employee-intensive. "IDFC would now need to expand its retail-banking footprint and that would create employment at the bottom end and also make top-end management talent competitive."

The same would be applicable for Bandhan, he said. Even though the company has over 2,000 outlets, retail banking altogether require different skill-sets. The licences would ramp up hiring, he said.

Banking circles estimated a conservative 1,500 employees required for IDFC.

"A bank's branch requires at least 10-12 executives on an average, plus another 300 employees for back-end processes. Assuming 100 branches for IDFC during the year, the number of employees could easily top 1,500 employees at the least," said a banker at a private bank.

The central bank constituted a high-level advisory committee under the chairmanship of former RBI governor Bimal Jalan. Other members of the committee are former RBI deputy governor Usha Thorat, former Securities and Exchange Board of India chairman CB Bhave and Nachiket M Mor, director on the central board of directors of RBI.

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