25% rural branch norms has L&T in double-minds on banking

Even as India Inc awaits the final guidelines for new bank licences, the L&T Group, which has been a serious contender for the same, today expressed the feasibility of the strict entry norms that has been put forth in the draft paper by the RBI.

The main issue of contention seems to be the 25% mandatory rural presence, as stipulated in the draft guidelines, issued by the Reserve Bank last month.
"It is not easy to say that rural branches are viable or not. Is there any other mode of servicing the rural clients without the normal brick and mortar banks? These are areas that we really need to work on," L&T Finance Holdings
President and Whole-Time Director N Sivaraman told reporters here.
He was replying to a question whether the 25% stipulation for rural branches would deter for the new players.
"All those evaluations will have to be completed. We definitely need to do a thorough evaluation on whether it will be worthwhile at this point of time," he added.
However, Sivaraman was quick to add, "I will not say that we are not interested. Definitely, as a financial services player that is of great interest to us, and we will actively consider the prospect.
"I think, it is an opportunity that is important for a financial services player. So we can not ignore it. We will have to wait for the final guidelines to come out. Once RBI announces its final guidelines we will definitely work on it," he said replying to a query on whether the group will pursue entering the banking space given the strict entry norms.
The Reserve Bank last month had issued the draft guidelines on new bank licences, pegging the minimum required capital for the holding company at Rs 500 crore, and limits the foreign shareholding at 49 percent.
At present, the minimum capital requirement for the banking sector is Rs 300 crore and the foreign shareholding in private sector banks is allowed up to 74%of the paid-up capital.