Ex-Citi boss Vikram Pandit to lead JM Fin banking foray

Moneycontrol Bureau

Nimesh Kampani-promoted JM Financial Thursday sought to strengthen its case for a banking license by roping in former Citigroup CEO Vikram Pandit.

At its board meeting on Thursday, JM Financial approved a proposal to apply for a banking license as per the Reserve Bank of India’s guidelines. Pandit will be nominated as non-executive chairman for the proposed bank, the JM Financial release said.

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Pandit, and his business partner Hari Aiyar will each buy 1.5 percent stake in JM Financial through warrants, the Mumbai-based financial services group said in a statement.

The warrants issued to Pandit and Aiyar will be priced at Rs 19.05 apiece, reports CNBC-TV18's Sajeet Manghat, quoting sources. These warrants can be converted anytime in the next 18 months.

Will JM Financial manage to get a bank licence?

Sources and several banking sectors experts believe that it will be a tough challenge for JM Financial to get a banking licence as the June deadline looms. Despite the fact that Vikram Pandit or Hari Aiyar being roped in and investing in the banking entity, it is still a very weak application, experts believe. 

“Unless Vikram is heading or is at least the one who is promoting the banking entity it would be a very difficult task for the RBI to grant a licence to a broking or investment banking entity,” sources said.
 
Although the RBI has relaxed norms to allow any entity to apply for a licence, but ultimately how many entities will be given a licence and on what basis is yet to be known. Broking entities like India Infoline are also looking for a banking licence. It is going to be a big challenge to distinguish between those who are most eligible and those who are not, in receiving the the license, going forward.

With such a heavyweight such as Pandit on its side, it's now up to JM Financial to decide the manner in which it will approach RBI and present its case for a banking licence.