BSE, NSE eye
setting up small banks
NEW DELHI: Bombay
Stock Exchange and the National Stock Exchange are looking to set up small
banks in the country once the Reserve Bank of India opens the window for
applications.The move will help the two exchanges, which have cash transactions running into thousands of crores, manage some of the funds, but will come as bad news for the existing players, such as HDFC, which manage this amount and benefit by way of low cost of funds.
On Thursday, RBI
governor Raghuram Rajan had said that the regulator is set to issue guidelines
for fresh small banks and is expected to invite proposals by the end of the
month.
But the exchanges have been working on the proposal for the past few months. Sources said the BSE board discussed the proposal, although some of the directors had certain reservations. The proposal may be headed for discussions again once the RBI issues the final norms, said a source privy to the talks.
But the exchanges have been working on the proposal for the past few months. Sources said the BSE board discussed the proposal, although some of the directors had certain reservations. The proposal may be headed for discussions again once the RBI issues the final norms, said a source privy to the talks.
Similarly, the
NSE is learnt to have discussed the plan, although the exchange declined to
comment on the issue. BSE spokesperson could not be reached for comment.
Sources said the
proposals are only at the discussion stage and a final decision on seeking a
licence will be taken after the guidelines are released.
Experts, however, said
while exchanges may be drawing up plans to set up banks, there is no guarantee
that the RBI will issue licenses given that the proposed banks will handle cash
that is generated during a related entity's business. They said the regulator
will decide on the proposal based on how the bank is structured.
In addition, they said
in several developing countries, including India, banks have joined hands to
set up a stock exchange but it is rare for stock exchanges to set up banks.
In the past, the RBI
has been very selective in issuing bank licences and has hand-picked the
promoters who have been given bank licences. But, with small banks - which are
now expected to be allowed to get a pan-India footprint - and payment banks,
the RBI is trying to deepen the reach and is expected to be more lenient.
In the draft
guidelines issued by the RBI, payments banks and small banks were proposed to
be niche or differentiated banks to push financial inclusion. The RBI had
proposed that the presence of small banks be restricted to contiguous districts
in a homogeneous cluster of states or UTs to give them a local feel. But this
rule is proposed to be changed.
Read more at:
