Banking aspirants line up foreign partners

With less than a week left to apply for a banking licence, foreign players have started inking deals with Indian counterparts to meet the criteria laid down by the Reserve Bank of India (RBI).

On Wednesday, Religare Enterprises announced that US-based Customers Bancorp Inc (CUBI) will invest $51 million in it through a combination of primary and secondary market transactions.

The US-based holding company for Customers Bank will buy $22 million worth of equity shares from  Religare’s promoters. “In addition, CUBI shall make an investment of $28 million in share warrants issued by the company on preferential allotment basis” and also subscribe to common equity shares of $1 million on a preferential allotment basis, it said in a statement.

The deal is part of Religare promoters’ plan to divest 22% of their stake to bring it down to 49%, in order to qualify for setting up a non-operative financial holding company (NOFHC) as per RBI norms, the statement said.

It, however, did not specify the exact quantum of stake Bancorp is buying from Religare’s promoters.

Wednesday also saw Sumitomo Mitsui Trust Bank and Nippon Life Insurance proposing to buy 4-5% stake each in the new bank planned by Reliance Capital, indicating the Japanese, too, have decided to test their fortunes in the Indian banking industry.

Among others, Videocon is also believed to have submitted its proposal to bring in a foreign partner earlier this week.

As per RBI guidelines, the promoters, or the promoter group entity setting up the NOFHC, can have minority foreign shareholding provided these entities are “owned and controlled by residents”.

Other players like L&T Finance Holdings and Magma Fincorp are in the process of finalising their proposals to be submitted to the RBI this week. The proposed window of 18 months would be sufficient to make a transition to a bank, Magma has said.

Aditya Birla Group has already applied for a banking licence.

However, Mahindra & Mahindra Financial Services, which was expected to apply, has backed off citing rigid criteria laid down by the RBI.