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Oct 09, 2012, 03.22 PM IST | Source: CNBC-TV18

Bank licence issuance process may start in a month: L&T Fin

In an interview to CNBC-TV18 YM Deosthalee, chairman and managing director of L&T Finance Holdings said, the guidelines issued by the Reserve Bank of India (RBI) for new banking licenses on October 5 are largely in line with draft.

In an interview to CNBC-TV18 YM Deosthalee, chairman and managing director of L&T Finance Holdings said, the guidelines issued by the Reserve Bank of India (RBI) for new banking licenses on October 5 are largely in line with draft.

Further, he said that L&T’s diversified shareholding is an enabling factor for the banking licence. "It's not a family managed company and our largest shareholders are financial institutions. L&T is the largest shareholder for L&T Finance Holdings," he added.

Meanwhile, he expects the central bank to start the process of issuing impending bank licences in one month. However, actual rewarding of licences might take atleast one year.

Below is the edited transcript of Deosthalee's interview with CNBC-TV18.

Q: How did you read the guidelines for new banking licenses which came out from the Reserve Bank of India on the 5th October? Did it seem to favour companies like yours without any great pronounced promoter group holding?

A: Those guidelines are more or less inline with the draft guidelines which they had issued, so there is nothing much in that. In terms of change; whether it favours or not is for the RBI to decide. I can only say that currently it is still speculative and we are awaiting the final guidelines from the government and we will take it from there.

The only thing which I can say is that it makes sense from a business perspective to have a diversified portfolio and that’s what we are building in L&T Finance. We are not only focused on non banking financial companies (NBFC) and that’s one of the reasons for that to derisk and of course to prepare for the future. In terms of guidelines, I do not think there is much of a change than what we saw earlier.

Q: The market seems to read it as a clear leaning towards professionally driven companies without an identified large industrial promoter group. Did you detect any such leaning in the guidelines which came out?

A: No, I didn’t. The fact remains that L&T group has definitely diversified shareholding. Everybody knows that it’s not a family managed company and our largest shareholders are financial institutions. L&T is the largest shareholder for L&T Finance Holdings.

All along for the last 75 years it has been that way and professionalism is in the genes of this group. But you never know, today it is all reasonably speculative.

Q: In your mind do you have a timeline by which things can move because after the initial flurry of activity a few quarter back things had gone into cold storage and they seem to have been rekindled again. What are your hopes in terms of some kind of timeline on announcements in terms of license?

A: In any case it is going to take time. If we read the newspaper reports; the process may start but, even if Reserve Bank of India starts, they will have to appoint a committee, ask for business plans, they will have to wait fit and proper. The entire process may take time, but we hope that the process will start sooner than what we were thinking a few months ago.

So that’s the only thing which we are reading, maybe in a month or so the process maybe initiated. I am not very sure whether the actual awarding of license will happen very soon because in any case, it takes time for the regulator to decide. If I were to make a guess, then the process may start but it will take about a year before a new license is issued, at least. This is my initial guess and that’s all speculative.

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