The International Finance Corporation (IFC) has plans to increase its exposure in the Indian banking sector by helping new banks raise funds. The investment could be 12-15% of the bank’s total equity, said Serge Devieux, regional director of IFC in South Asia.
IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector in developing countries.
“It is of strategic interest for IFC to invest in the banking sector and help the new entrants raise funds,” said Devieux. Some of IFC’s clients, such as Religare Enterprises, Bandhan Financial Services and Magma Fincorp, have applied for a banking licence. “Those who will get the licence (from the Reserve Bank of India – RBI) are assured of our support.”
He ruled out IFC picking up stakes over 20% each in the new banks. “By (IFC’s internal) policy, we cannot go over 20%, we prefer about 12-15%.”
Over half of IFC’s exposure in India is in the financial services sector spanning banks, non-banking finance companies micro finance institutions and housing finance firms. Its existing banking clients include HDFC Bank, YES Bank and Ratnakar Bank.
Twenty-six banking aspirants had submitted banking licence applications to the RBI on July 1. But two applicants, Tata Sons and Value Industries, have pulled out of the race.
RBI governor Raghuram Rajan had said that the central bank would roll out a set of fresh banking licences by January 2014. The High Level Advisory Committee chaired by former RBI governor Bimal Jalan would help the RBI finalise the list of new banking entrants.
Last fiscal, IFC had invested $1.3 billion in India, boosting its total country exposure to $4.5 billion, its largest country-wise. “The intent is to grow the exposure. There are plans to invest over $1 billion this fiscal year too,” said Devieux. Recently, IFC raised $160 million under the offshore rupee-denominated bond programme.
He did not spell out the details whether the planned $1 billion investment in India this fiscal would include the proposed stakes in new banks. Size of the investment for each stake, too, would be known only after the bank licences are issued in January, he said.
IFC had also invested $450 million in Tata Power’s ultra mega power project (UMPP) at Mundra, Gujarat, its biggest investment in India.