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RCap expects to reduce debt if given bank license

RCap expects to reduce debt if given bank license
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The debt-to-equity ratio of Reliance Capital would decline to 0.5 from 1.7 if the company manages to get banking license from Reserve Bank of India (RBI).

It may be recalled that the central bank invited application for new bank licenses from corporates, non banking finance companies and other entities earlier. Following this, Reliance Capital made application for a bank license.

In this background, Anil Ambani, Chairman of Reliance Capital said the firm would shift its entire commercial finance portfolio and associated debt to the new entity, to be called Reliance Bank, if RBI gives license. Ambani said this while addressing shareholders recently.

This would reduce the consolidated net debt of the non-banking financial company to Rs 5,000 crore from Rs 20,000 crore now, Ambani said.

The reduction in debt would enable Reliance Capital to focus profitably on businesses such as life and general insurance, and asset management, he said.

Ambani further remarked that the company was in a strong position to be given a banking permit by the RBI, and if it comes about, the move will help the company slash its debt.

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