Angel Broking feels that the final new bank licensing guidelines released by the Reserve Bank of India (RBI) is potentially game-changing for the banking sector.
The brokerage firm expects six to eight very serious corporates, with deep-pockets (far more than was earlier being anticipated), may get a banking license.
The guideline allows corporates where promoter-shareholding is less than 49 percent to apply for bank license.
Hence, with some structuring, amongst the large corporates that have evinced interest, Reliance Industries (RIL), Larsen and Toubro (L&T), Mahindra & Mahindra (M&M), Tata Group, Birla group and Bajaj as well as Shriram group amongst NBFCs could likely qualify.
In a report, the Angel Broking feels that broking and real estate companies may be considered as being exposed to asset price volatility and hence may implicitly not qualify.
This could have far-reaching implications regarding the competitive dynamics. The key question is how much equity capital these large corporates would aim to start with.
The report feels that there is huge pricing power in the banking sector as is evident from the high return on equity of banks. The pricing power of banks may decline as the new bank licence may raise the overall competitive intensity in the sector.