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Some MFIs plan foray into banking sector

Some MFIs plan foray into banking sector

Chandra Shekhar Ghosh, Chairman and Managing Director of Bandhan Financial Services said the microfinance company would apply for a banking license with the Reserve Bank of India (RBI).

Consulting firm Deloitte will advise the Kolkata-based microfinance company (MFI) on the application formality. The MFI has 45 branches and a customer base of 2.6 million in unbanked rural areas.

The company had capital in excess of Rs 1,000 crore, well above the stipulated requirement of Rs 500 crore for a new bank. The guidelines mandate new banks to have a minimum of 25 percent of branches in unbanked rural areas with a population of less than 10,000.

Similarly, another MFI, Janalakshmi Financial Services, is also making a bid for a banking licence, media reports indicate.

It is argued that microfinance companies are better positioned to meet the priority sector norms. Further, unlike a few large non-banking financial companies (NBFCs), microfinance companies can continue with their existing business while foraying into banking.

NBFCs such as Shriram Capital are looking for an exemption from the Reserve Bank of India (RBI) to continue with their niche business of financing used trucks to get into banking.

Besides MFIs, several companies in the financial services sector want to apply for banking license. These firms include Reliance Capital, Aditya Birla Nuvo, Shriram Capital, LIC Housing Finance, L&T Finance, IDFC, Tourism Finance Corporation of India, Edelweiss, Religare, India Post and Srei Finance.

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