Magma Fincorp to apply for a banking licence

Moneycontrol Bureau

Magma Fincorp, a Kolkata based non-banking finance company, decided to apply to the Reserve Bank of India (RBI) for a new banking license. The company's board which met Wednesday approved the decision to go ahead with the application process.

"Magma has, since the beginning, been serving the credit needs of underserved and un-banked customers largely in rural and semi-rural areas; these segments have offered good business opportunities and have enabled Magma to build a unique long term business model that is both profitable and sustainable," the company said in a release.

Magma Fincorp shares fell half a percent to close at Rs 85.50 per on Wednesday. Since last one year, they rose nearly 47 percent or Rs 27. Its nearest rival - Cholamandalam Investment and Finance shares rose 36 percent or Rs 61. It was trading around Rs 234. Magma’s market capitalization stood at around Rs 1,620 crore as against Rs 3,345 crore of Cholamandalam's.

Also read: RBI stiffens gold lending norms for regional rural banks

Magma emphasized, their focus remains firmly on the existing business that while applying for a banking license.

"All the customers of Magma will have access to a full range of banking services very quickly including deposits and remittances. So a lot of inclusion will occur by way of additional services to the existing customer base even without Magma expanding its asset base," the NBFC said.

The Reserve Bank of India has proposed an 18 month window from the date of in-principle approval to commence banking operations. The last of application is on July 1.

Magma feels that the proposed time window would provide sufficient opportunity to the company to make a transition to a bank with minimum disruption in the normal business of the company.

saikat.das@network18online.com