Last updated: 26 Nov, 2020 | 08:32 am
Shares of NBFCs have been in focus this week after RBI’s panel recommendations suggested that it would be easier for NBFC’s to apply for a banking licence.
What is the RBI panel’s recommendation with regard to NBFCs?
NBFCs versus banks
While these changes make it easier for NBFCs to apply for a banking licence, the ultimate power of fit and proper criteria and due diligence rests with RBI. RBI would be the final deciding authority. Earlier, even Larsen & Toubro was not granted a banking licence by RBI.
Brokerage firm Macquarie has pointed out that the experience of allowing corporate houses to run banks has been pretty bad for RBI (eg: Times Bank, Bank of Rajasthan, etc). Thus, getting a licence could still be difficult for the NBFCs.
However, the fact is that India needs more banks as the size of the country and economy is growing. Each of these NBFCs will have to take a call about the future course, depending upon the current expertise they have, the infrastructure that they have built, the management bandwidth and also the ability to cater to a wide range of services which banking as an industry provides. Further, the compliance requirements of becoming a bank could be a deterrent.