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Finance Ministry Looks to Allow Corporates In the Banking Sector

MP Rana, Thursday 18th August 2011


Finance Ministry has lately come up with a proposal to allow the entry of top corporates of the country to enter the banking industry in India. In a move to liberalise the country’s banking sector which has vast untapped potential, the authorities would restrict the entry of Corporates of four sectors, including Real Estate, in the baking sector of the country. But still, there are certain differences prevailing between Finmin and RBI over the amount of foreign ownership allowed and time frame for dilution of promoter’s equity. For a start, the permission of entry will be inclined towards NBFCs (Non Banking Financial Corporations) and other businesses who have some arm into financial sector and have deep pockets. Currently, the Indian Banking Sector is primarily dominated by 26 state owned banks who control about 75% of the assets and rest is shared by privately owned banks like HDFC, ICICI and other foreign banks.


The procedure for giving permit to the private players will be strict enough so as to entertain only the capable companies. Such a move in times of stimulation through the introduction of economic reforms along with continuous monetary tightening and subsequent slack in growth would bring a boost in the capital mobilisation in the country and will work towards improvement in overall channelisation of funds in the forthcoming time.


The minimum capital that the new entrant will have to infuse initially is set at Rs.1000 crore which shall be increased by Rs. 300 crore over a period of three years from the date of start of business, as per the stipulation of RBI. The industrial houses who are actively eyeing the opportunities in this respect are Shriram Group, Anil Dhirubhai Ambani Group, Larsen & Toubro and Aditya Birla Group.

With Contribution from Somil Gupta

 
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