Will Shriram convert any existing NBFC to float a new bank?

Saikat Das
moneycontrol.com

Shares of Shriram City Union and Shriram Transport have rallied 36 percent and 18 percent over the last three months, as investors are betting on the group getting a banking licence. But there is no clarity on which of the two non-banking finance companies will be applying for the licence.
"We prefer to apply for a separate banking license," said G S Sundarajan, executive director, Shriram Group told moneycontrol.com.
"We will evaluate it once the final guidelines come out. Till date, Shriram group has around 1 crore customers of which 90% are first time borrowers from any institution. Our focus is on retail customers as well as micro, small and medium enterprise. We will naturally tap this bankable customer base in case of floating a new bank. However, the regulator has to decide on whether it issues separate license to us. Presently, we cannot convert 100% NBFC business into a bank," he said.
The moot point is the route of foraying into banking operations. The Chennai-based Shriram management has expressed willingness to apply for the new banking license many a times. However, it apparently rejected the possibility of converting any one of the existing NBFCs to kick-start its banking operation subject to regulatory approval.
"We expect, the group may fund its banking business through one of its existing NBFCs, which enjoy good networks through its branches. While STF reaches customers in the unorganized sector, SCU has a growing portfolio of two wheeler and gold loans," said a research analyst from a large domestic brokerage that does not cover those stocks actively.
Earlier in 2011, RBI had already issued the draft guidelines for new banking license in private sector space. Later in July, 2012; the central bank put up the suggestions that it had received on those draft guidelines. Recently, the parliament has passed the new banking amendment bill and RBI is likely to come out with final guidelines by February, 2013.  
saikat.das@network18online.com