With barely two months left before the Reserve Bank of India (RBI) issues new bank licences, Tata Sons, led by Cyrus Mistry (pictured), has preferred to opt out of the race.
The decision comes five months after applying for a banking licence.Tata Sons said in a statement that it had evaluated the guidelines for licensing and reached a conclusion that it’s current financial services operating model best supports the current needs of Tata group’s (domestic and overseas) strategy.
“After prolonged deliberations and detailed analysis, Tata Sons has therefore decided to withdraw its application dated July 1, 2013, from the current round of licensing,” the company said in a statement.
This is not the first time that a conglomerate has sounded off the unfavorable structure laid out by the RBI for new bank licences. Earlier in June, Mahindra and Mahindra (M&M) group had decided not to apply for a banking licence citing the same reason.
The reasons that may have kept these large groups from entering the fray include bringing all bank-like businesses under the proposed bank rather than continuing with their existing subsidiaries.
There was also no leeway in maintenance of cash reserve ratio, statutory liquidity ratio during the initial years and priority sector lending norms.
Banking aspirants had sought clarifications from RBI on the final guidelines, to which the regulator had issued a detailed response on June 3, 2013. By July 1, the deadline to apply for banking license, RBI had received 26 applications. On September 6, the RBI said that Videocon, another large conglomerate had withdrawn its application.
All hope is not lost, however. RBI governor Raghuram Rajan has,on many occasions,spoken of going for `on-tap’ licensing as opposed to the current practice of block licensing.
Both, the regulator and the government have also backed the idea of ‘differentiated’ licensing where players could adopt for specific areas of banking and need not meet priority sector norms.
Tata Sons indicated that it would continue to monitor developments with great interest and may participate in the banking sector at an appropriate time. The company said it remains committed to financial inclusion and believes that the group’s existing financial services footprint uniquely positions to provide technology excellence and access to India’s hinterland.
RBI has indicated it would roll out new bank licences by January 2014. The applicants were to be screened by RBI to ensure prima facie eligibility and then the shortlisted applications would be referred to a high level advisory committee. The committee, headed by former RBI governor, Bimal Jalan, held its first meeting on November 1, 2013.
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