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Moneylife » Investing » Companies & Sectors » New banking license announcement is first major reform in two decades

New banking license announcement is first major reform in two decades

Moneylife Digital Team | 26/02/2010 08:53 PM | 

Banking

NBFCs and the private sector can now enter the banking business if they meet RBI’s criteria. This is a major move for the financial sector

Private players and non-banking finance companies (NBFCs) have reason to cheer the Budget speech as the finance minister announced that the RBI is open to giving them banking licences if they meet the apex bank’s criteria.

“The RBI is considering new bank licences to promoters in the private sector and also NBFCs, if they meet the eligibility criteria of the RBI,” Pranab Mukherjee said while presenting the annual Budget for 2010-11 in the Lok Sabha.

NBFCs like Indiabulls, Reliance Capital, Religare, IL&FS, IDFC and Aditya Birla Financial Services are likely to apply for bank licences after the RBI norms are in place.

“The Aditya Birla Financial Services Group is already a large non-bank player occupying a significant position across all its verticals. We wholeheartedly welcome this initiative and will definitely apply for a licence. The Aditya Birla Group is confident that we will meet any eligibility criteria that might be set," said Ajay Srinivasan, chief executive (financial services), Aditya Birla Group.

“The finance minister has shared the government's desire to open up the banking sector to NBFCs and the private sector. This is a significant step towards further strengthening and broadening the banking sector and bringing it closer to the aam aadmi,” adds Mr Srinivasan

No new banks have been set up in the past eight years. In fact, no new Indian bank has been set up since the first flush of liberalisation in 1993 when half-a-dozen banking licences were given. This announcement clearly demonstrates the government’s plans for liberalisation of the financial sector.

India has 96 scheduled commercial banks (SCBs)—27 public sector banks 31 private banks and 38 foreign banks—having a combined network of over 53,000 branches. According to a report by ICRA, public sector banks hold over 75% of the total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5%, respectively.

Unlike banks, all NBFCs cannot accept demand deposits. Only NBFCs which hold a valid certificate of registration with authorisation to accept public deposits can do so. NBFCs that were earlier allowed to be converted into banks were Kotak Mahindra Finance and 20th Century Finance. While Kotak has diversified into various financial services, 20th Century became Centurion Bank; it was taken over by a bunch of private equity investors and eventually merged with HDFC Bank. Two of the other new licensees in the early 1990s—HDFC Bank and UTI Bank (renamed Axis Bank)—have become very successful private banks.

The announcement also cheered the markets. The Sensex gained 175.35 points while the Nifty gained 62.55 points. Religare (an NBFC) inched up 3% to Rs371 from Rs361, Indiabulls shed 1% to close at Rs98.90, and Aditya Birla Nuvo gained 4% to end at Rs842.
 


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7 Comments
Rajendra Pawar

Rajendra Pawar 2 years ago

Sir, Which business groups & NBFC's will interested in starting new private sector bank?

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maring

maring 3 years ago

sir i want bank licence,for finance

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Akhil Agrawal

Akhil Agrawal 3 years ago

its great news that RBI is give the licence to the NBFC, and great oppourtunity in banking sector for the people who is unemployed....

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SANJAY PRABHU

SANJAY PRABHU 4 years ago

Attention Suspended / Terminated Employees of Axis Bank

As all the employee and depositors are aware, how the Axis Bank Management has forced the branch employees to mis-sell various bank products such as Metlife Insurance, ( and now Max New York ) Bajaj Allianz General Insurance, Priority Banking Savings A/c & Channel1 Current A/c to all those poor customers and shopkeepers who cannot maintain those high end average balances and looted them by charging with complicated charge structure and the ultimate beneficiary of those charges are the Top Management and the Heads of Central Office & Zonal Office Departments, who got the large chunk of Variable Pay, Functional Pay, ESOP from 25000 to 200000 every year and also the Promotions in an unethical way.

As the Bank has withdrawn the powers of Branch Heads towards reversal of charges, the branches has adopted unethical practices to reverse those charges to customers such as increasing the DG Set fuel expenses, increasing the printing and stationery expenses, canceling the unclaimed DD and Pay Orders of customers etc, which was a serious frauds done by the employees in order to protect the interest of the depositors, as the management was not entertaining / responding to the mails sent by the branches towards reversal of charges.

The bank has no staff accountability concept since inception till 2009 and after my whistleblower they have discharged me from the services, and after that management starting dismissing the employees to show that they have been taking serious action. While taking those decision / actions, they have not even provided the defense representative to employees to defend the case and they have taken one sided decision, without going to the root cause of the frauds.

Now in order to bring it to the notice of general public and in order to decide the next course of action, all the suspended / terminated employees are requested to join the Private Bank Employees & Investors Protection Forum and make travel arrangement at their own cost to meet at Pune on 29th August, 2010 along with the following documents.

a) Memo / Show cause notice issued by the bank and your reply to defend the case.
b) Copy of the minutes of the Personal Hearing signed by you and the inquiry officer of the bank
c) Charge sheet / Suspension Letter issued by the bank
d) Axis Bank Investigating Committee report
e) Termination Letter
f) Any other documentary proof to defend your case or to prove the unethical practices of the management are welcomed

Suspended / Terminated Employees, please note that if you have pocketed the money for personal benefits, then we will not be able to protect you, but if you have utilized those money towards reversal of charges, then yes we have all action plan to protect you and the investors interest.

http://www.moneylife.in/article/8/8106.h...

http://www.garhwalpost.com/index.php?mod....

http://www.caclubindia.com/blog/show_blo....



Issued in Public Interest

Sanjay Prabhu – Pune

President - Private Bank Employees & Investors Protection Forum

Ex Discharged Employee & Share Holder of Axis Bank

sanjaymprabhu@gmail.com 95940 88588

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SANJAY PRABHU

SANJAY PRABHU 4 years ago in reply to SANJAY PRABHU

Attention Suspended / Terminated Employees of Axis Bank


Please note that the venue will be at Colaba, Mumbai instead of Pune.



Thanks & Regards,

Sanjay Prabhu – Pune
President - Private Bank Employees & Investors Protection Forum
Ex Discharged Employee & Share Holder of Axis Bank

sanjaymprabhu@gmail.com
95940 88588 / 90294 96425

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SANJAY PRABHU

SANJAY PRABHU 4 years ago

Respected Regulatory Authorities
Before issuing any more licences to the NBFC & Industrial/Business houses, let us go through the ground realities from different angles as an Investor, Depositor & as a Regulator of the Republic Citizens of India and then let us come to an debatable conclusion if India really requires new faces of private banks and if answer is really YES then let us answer some questions i.e. whether the existing regulator has enough capacity to monitor those new faces? Whether the regulator was successful in the past in monitoring the existing banks? Where is the accountability of the regulator & the promoters in monitoring those sunk ships like GTB and various NBFCs like CRB, Lloyds etc ? Is our Regulator know for giving clean chits?. How does RBI monitor those mushrooming Microfinance companies ? who loot the poor by charging 25% to 40% Interest in the name financial inclusion, by adopting all unethical practices including involvement in money laundering activities. Does RBI has control over Microfinance Companies towards end use of those funds? Or is it the best time to consolidate banking sector with few private and nationalised bank and save the investors money. Let us discuss all those points in detail
With my 17 years experience in private bank, we have seen the tremendous growth in business by adopting all unethical practices, and major chunk of business is pooled from nationalised bank, as at that time the nationalised bank were not having core banking solutions and ATM network till 2007, but now due to core banking solutions, most of the corporate and individuals feel more secured with the transparency of nationalised bank and the same concepts stands true with insurance also and hence we see the reverse scenario of shifting the business back to the nationalised bank. Refer my comment on Axis Culture Ref Business India dated 25/07/2010 & page 8 of Business India – Independence Day special issue dated 22/08/2010. “Axis Bank has grown by acquiring business by putting aggressive pressure on the branches and adopting all unethical and illegal practices and ignored fundamental aspects of banking such as operational efficiency, staff accountability, audit & compliance and hence the bank is facing a serious issues with a high NPAs, serious frauds through senior branch officials due to business pressure and also unethical HR practices like withdrawal of ESOPs up to the level of AVPs and giving 1 lac and 2 lac esops to MD and DMD, promotion not on the basis of merits and performance but on the basis of lobbying, frequent changes in PMS & Promotion policies has increased staff attrition rate. Its a time to re look into those issues seriously and grow clean & green in order to bring the permanent light from shadow. Sanjay Prabhu – Pune Ex Employee & Share Holder of Axis”
Axis Bank in order to show 70% YoY growth, has given unachievable budgets of 90% to 100% yoy basis to Branch Head and employees and those Branch Heads has adopted all unethical and illegal practices to achieve the budgeted level of growth, and in the pressure of growing business they have unknowingly committed serious frauds not only in savings and current accounts but also a criminal breach of trust in Govt Accounts such as JNNURM 150 crores fraud with Nashik Municipal Corporation Accounts, Central Excise Chandigarh fraud, Defence Accounts frauds at Kanpur, out of court settlement with Exporters in forex derivatives frauds, Agri Credit fraud at Rajkot, Lucknow, Forex Frauds in Kolkatta and Mumbai, agricultural debt waiver and debt relief scheme frauds which has been happening for last 3 years and the bank internal and external auditors could not unearth the frauds, as the auditors like Mr. Vyas – VP & Zonal Audit Head & Mr. Nandi – erstwhile Zonal Head and presently the Audit Head of the Bank, was himself involved in serious frauds and hence before giving licences to any new faces I request CBI, Enforcement Directorate & Economic Offence Wing should investigate in to the matter and fix accountability on the Top Officials of Axis Bank.
After my whistle blower on staff accountability, axis bank management woke up suddenly after 15 years and first time in the history of axis bank they have realised that they are dealing in public money and they have terminated the services of those branch heads and junior employees who actually where not the real beneficiaries of frauds, but the Axis Bank top management who took a large chunk of variable and functional pay along with large number of ESOPs where the actual beneficiaries of those frauds, as all unethical practices has been forced by the management on the branches in order to deliver the results at any cost and hence the branch employees had no option, but to bribe the officials and get the business and the branch heads and junior level employees have been made scapegoat by the management.
By giving new licenses to new faces we will be compromising on safety and security aspects of public money, as the preset regulatory authority has failed in monitoring the existing private bank and if we allow new faces we will be putting more burden on the depositors money. Presently in Urban & Semi-Urban locations we see all the Nationalized & Private Sector Bank not competing but actually pulling the business of each other by adopting all unethical and illegal practices. In order to handle the same volume of business at one center we spend crores of investors money in various banks branches leased premises rentals & lavish Interiors, staff cost, Electricity and if we consolidate and grow with few private and nationalized bank, then every bank will have enough business to handle, we will see healthy competition and the greatest saving will be on the multiple cost incurred by each bank on leased premises rentals & lavish Interiors, staff cost, Electricity & transactions cost, which will definitely add value to investors / depositors money, at the same time it will be easy for Regulatory Authority too to monitor and keep a track of the situation.
I see the future of India in villages / rural areas i.e. category III to VI Branches and hence in order to capture the great potentials of growth in Agri business and to give equal opportunity for Poor and underprivileged to enjoy better standard of living, it is our obligation to provide transparent banking facilities towards financial inclusion in those villages, but keep in mind that not at the cost of looting the poor in the name of financial inclusion. Hence RBI as the regulator should make it compulsory for all private banks that rural Savings A/c & Current A/c should have an average balance requirement of Rs. 1000/- & 2500/- respectively and the charge structure should not be the looting one as it is prevailing today in private sector banks. RBI should monitor the bank more aggressively and also keep the third eye reserved in order to monitor the worst practices adopted by the bank management, so that we can protect the interest of investors / depositors, before it is too late. I would like to quote one such example of Axis Bank failure on Corporate governance which is as under
“In February 2010 the Times of India & Economic Times has reported that axis banks new headquarters deal in buying Bombay dyeing property at Rs. 782 croes is the costliest deal in the present market recession, where as the similar properties are available at Rs. 500 crores and even banks like ICICI is cutting its cost by shifting the major departments to hyderabad and Axis Bank being the schedule commercial bank should have invited quotes for such a huge investment of public money through all the leading newspaper for buying the property, instead they have opted illegal methods and paid the brokerage to the tune of 23.50 crores from public kitty and they have deceived the investors and taxpayers money to the tune of rs. 282 crores , plus the brokerage to the tune of rs. 23.50 crores. Banks top officials are involved in multi crore fraud of leased premises, wherein they have purchased the Branch & ATM premises in their relatives name and given it to Axis Bank at a rent which is twice above the prevailing market price and if this type of practices continues in private sector banks then I am sure the new junior faces will follow the legacy of our new and old generation private sector banks and the depositors will be taken for a Ferrari Ride.
Wake up regulators, its time to act judiciously in the interest of the investors, as every one wants to take a bath in the holy rivers of India and make it more polluted. If this fraudulent practices continues with the blessings of our regulators, then we will see collapse of Indian financial systems and RBI will have to merge this white private sector elephants with nationalized bank and we will see more frauds in banking similar in line of satyam.
If you really wants to give the opportunity of adding new faces in the banking, then I request you to give the opportunity to the Indian Post Offices and LIC, and I am sure they will handle the job of financial inclusion in a sincere manner.
My sincere thanks to Dr K. C. Chakrabarty, Deputy Governor, RBI, as we see one person among the 113 crores population, who can voice the concern for investors protection and if every citizen try to perform his duties with sincerity then India can have Ram Rajya against all the odd Rawanas.

Sanjay Prabhu – Pune
President of Private Bank Employees & Investors Protection Forum
Ex Discharged Employee & Share Holder of Axis Bank

sanjaymprabhu@gmail.com 95940 88588

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