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Feb 25, 2013, 03.46 PM IST | Source: CNBC-TV18

RBI may grant at least 6 licences in 2013: Shriram Group

In 1993, 10 licenses were granted and in 2001 two licenses were granted. Duggal expects the central bank to grant atleast half a dozen licenses. However, this process should not be a prolonged one.

Last week the Reserve Bank of India (RBI) issued the final guidelines for licensing of new private sector banks wherein entities both from private and public sector shall be eligible to set up a bank through a wholly-owned non-operative financial holding company.

The final licensing norms are largely in-line with draft guidelines, Arun Duggal, chairman of Shriram Group told CNBC-TV18.

"Our preference is to set up a separate bank under Shriram Capital. We want to profitably serve low income families, small businesses, truck drivers, shop keepers etc which are not yet served by the banking system," he added.

In 1993, 10 licenses were granted and in 2001 two licenses were granted. Duggal expects the central bank to grant atleast half a dozen licenses. However, this process should not be a prolonged one.

Below is the edited transcript Arun Duggal’s interview with CNBC-TV18

Q: What have you made of the guidelines and whether they seem more onerous than what the draft recommendations are or whether this actually opens up the field for players?

A: We are still studying the guidelines; they are quite comprehensive and rather detailed. We still are in the process of evaluating the various provisions under the guidelines. However the guidelines are largely in line with what the preliminary guidelines were.

Q: There are just a couple of provisions which pertain to companies like yours. First that the promoter entity is allowed to set up a bank through a non operative financial holding company. All companies do not have this flexibility. Would it be restrictive on the part of Shriram Group to go through this route?

A: It is an important question and I must say that our preference is to go set up a separate bank under Shriram Capital. However let me also say as to what our ultimate desire and aim here is.

We are proceeding on the assumption that the thrust behind the new license will be to improve financial inclusion, to provide banking services to nearly half of our population which is not served at all or served well by the existing banking system.

So that is the assumption based on which we will be proceeding with our application and we would want to create a very different kind of bank, a bank which can serve low income families, small businesses, truck drivers, shop keepers etc which are not yet served by the banking system.

We would want to serve them profitably. To do that we will have to have a very low cost structure completely different way of doing banking and that is what we would like to do, that is what we are planning to work on.

Q: One of the regulation seems to suggest that all Non-Banking Financial Banking Company (NBFC) lending operations within the group need to be merged with the bank. Is this feasible for you?

A: That is not our understanding and that would not make any sense at all from the reading of the regulations.

Q: How difficult would it be for you to meet the Statutory Liquidity Ratio (SLR) and the cash reserve ratio (CRR) recommendations straightaway if you were to set up a bank?

A: That shouldn’t be a problem for us, we have enough financial flexibility and we have planned for it so as far as the capital requirements are concerned it shouldn’t be any problem for us.

Shriram Trans stock price

On October 20, 2014, Shriram Transport Finance Corporation closed at Rs 923.20, up Rs 23.45, or 2.61 percent. The 52-week high of the share was Rs 1021.30 and the 52-week low was Rs 544.20.


The company's trailing 12-month (TTM) EPS was at Rs 54.19 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 17.04. The latest book value of the company is Rs 364.65 per share. At current value, the price-to-book value of the company is 2.53.

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