There isn’t a global standard so RBI wanted to know what are the arguments for and against industrial houses been given a license. The logic is that they do not want to mingle the commercial business with banking activity. My personal view on this is that there hasn’t been any major argument in the report to say why this current stance has to be changed.
NS Vishwanathan, Former Deputy Governor of RBI
We have introduced the concept of mobile finance bank, we have payment bank, and there was some discussion on payment bank. I would say rather than thinking of only converting everything into SFB and if our idea is to have the financial inclusion and large penetration of credit, it would be a great idea to allow the payment bank to do something credit. So there would be another institution in addition to the universal bank and SFB and serve the purpose very well. So, I am not fully convinced that we need to unleash a dozen of new banks to bring the growth in this country.
SS Mundra, Former Deputy Governor of RBI
I think the number one priority is one lead regulator which in this case is RBI for 2-3 very large NBFCs. They need to be tightened on regulations and they need to be given freedom to quickly become banks. Otherwise, we are running 2 big risks. One that they are penetrating a lot and they are doing a fantastic job of a private mindset, the risk management and risk taking, but they will need deposits and they will need a much more sustainable business model. So, that is an absolute number one priority.
Second priority is the lead regulator should equip itself with the supervision capacity, at least start by regulating these complex, very large, very distributed NBFCs. I think they are the two most important steps if you break down this whole internal working group. You need retail credit growth -- I am a little worried about SME and MSME, but from my point of view these are the 2 big things you should start with.
Sanjay Nayar, CEO & Country Head of KKR India
If you take the agricultural reforms, the MSME definitional changes, the PLI scheme, the labour reforms - all these together - it is an attempt to change the macro configuration of the economy towards those sectors that are more employment-intensive. Especially the primary and secondary sectors – the primary sector is agriculture, secondary sector is manufacturing. This is important because if we need sustained growth to happen that can only happen through robust job creation in the economy, not through jobless growth.
Krishnamurthy Subramanian, Chief Economic Adviser, Government of India
The outlook for the lending industry is good but focus on the strongest plays because there will be a degree of pain associated over the next 6 months with the COVID NPAs. NBFC sector is way more fragmented than banking space. My reckoning is the premium financial services companies in our country, both the savings and lending plays have a good outlook for the next several years. The savings play argument is now well understood – high quality life insurers, high quality general insurers and asset managers have a good outlook in our country.
The low cost of fund was one of the major factors driving auto sales. Agriculture reforms will aid very strong tractor sales for next 2-3 years.
Saurabh Mukherjea, Founder, Marcellus Investment Managers
It is a process of evolution for many NBFCs to convert into banks. India needs capital at every level. We are moving to $5 trillion economy mark. We need capital and we need strong robust banking sector, there is no question about that.
Bahram Vakil, Founding Partner, AZB & Partners
The RBI panel recommendations are a big positive for the smaller banks. To comply with the regulations, the smaller banks will have to sell-off certain entities and that will bring in an element of value unlocking and re-rating for these banks. Equitas, Ujjivan, IDFC First Bank are the ones where investors should look at because of these recommendations.
Hemang Jani of Motilal Oswal Financial Services
The RBI’s announcement is just a recommendation, there could be a lot of changes. There are certain challenges with regards to converting an NBFC into a bank. Shriram Transport is not in a hurry to become a bank. I expect more debate on the internal working group's recommendations until final guidelines. Starting a bank is much easier than converting into one.
Umesh Revankar, MD, Shriram Transport Finance
Converting into a bank is a huge drain on the profitability of NBFCs. IIFL Finance has assets under management (AUM) of Rs 40,000 crore, so cannot apply for a banking license yet. Meeting priority sector, cash reserve ratio (CRR), statutory liquidity ratio (SLR) norms from day one of becoming a bank will be challenging. Internal working group's recommendations on new bank licenses are positive and it’s positive for IDFC, Equitas as there was irrational holding company discount.
Nirmal Jain, Chairman & CEO, IIFL Finance
The proposal of changes in promoter holding to 26 percent from 15 percent is an outstanding recommendation by the RBI’s internal working group. Industrial houses allowed to get into banking was also an outstanding move.
TT Srinivasaraghavan, MD, Sundaram Finance
I don’t know how much should we read into some of these recommendations by RBI panel because at the end of the day the final powers are always with the RBI and there have been always more exceptions to the rules. So irrespective of what the rules and the recommendations fit in the proper criteria and the due diligence criteria is never black and white for Reserve Bank of India and therefore you will always have these exceptions in the rule and irrespective of what the rules are we cannot take it for granted that you are going to get a license.
Suresh Ganapathy of Macquarie Capital Securities
When an NBFC is converting into a bank, it is not very easy, it is complex and the cost will increase. A good change that has been suggested by the internal committee is that they have given 15 years of time for promoter stake dilution. There is no need of an interim period for dilution.
As Bandhan Bank has plans on mutual fund and insurance business, we will not be going to collapse (the holding company structure) though it is good for some others.
CS Ghosh, MD and CEO, Bandhan Bank
The mortality rate has come down and that is reports from many parts of the world and I think it is because we know how to handle the cases much better. Educate people to be cautious and simple method of wearing a mask, avoiding a crowd should reduce the transmission dynamics considerably.
Localized freezing of operations is okay, on the other hand, a generalized lockdown I would strongly disagree with, it doesn’t work, it only increases hardship.
Jayaprakash Muliyil, epidemiologist and chairman of the scientific advisory committee of the National Institute of Epidemiology, Indian Council of Medical Research
We see the uptick in demand continuing mainly because of the festival season and the procurement of produce has been good so far. So I think the uptick will continue into November. We expect 12-15 percent growth in tractor sales and more than 20 percent growth in tillers business for FY21. We are waiting for how the procurement will play out in Q4. This is going to be critical because there have been good cashflow in rural India in Q2 and Q3 and that visibility is not clear at the moment for Q4.
Antony Cherukara, CEO, VST Tillers Tractors
Lower rates and lower stamp duty has pushed home sales in Mumbai. Capital values have seen some pressure in H1. In H1 we have seen capital values correcting further by around 4-6 percent in the city. Secondly, interest rates are at one of the best at less than 7 percent which is again a first. The final push has largely come in from the stamp duty reduction rates. So that has led the undecided fence-sitters to take a call and jump on the other side and purchase property in the city of Mumbai.
Isha Chaudhary, Director, CRISIL
With vaccine requirement on the cold chain required in India, we need to scale up. This will definitely have an impact over the other industries because most of the cold chain will be required to cater to the vaccine demand. So, for the industry, I feel that it is going to be a big challenge because the industry will face a shortage of cold chains when the vaccine comes into India.
Tarun Arora, Director, IG Group
As of now we remain reasonably okay with our view that there is a limited upside but also a limited downside for the market and to take the upside over the longer-term, one will need to remain invested in the market.
FY21 numbers were beaten down significantly. The data at the margin has been improving. As long as the data at the margin continues to improve, there is a possibility of earnings upgrade coming through. Q2 most analyst numbers were at the rock-bottom. A lot of companies have surprised positively. If we get a little bit of support in terms of the topline growth, further earning upgrades cannot be ruled out, so I remain positive on that aspect.
Prasun Gajri, Chief Investment Officer, HDFC Life Insurance Company
From a banking perspective, I am still a little wait and watch mode in general because Supreme Court order on NPAs will come anytime now and we are going to see NPAs actually generate in the system with the restructuring laws in place at the end of November.
Deepak Shenoy of capitalmind.in
Indian IT companies have demonstrated their ability to gain share and offer a cost-competitive solution in this space. Indian companies are gaining share across the world. Pharmaceutical is a secular growth story and beneficiary of what is being seen in terms of the health crisis.
Though things are coming back in many ways for the auto sector. The fact is October retail sales for passenger vehicles is lower than the last year's October numbers. To that extent, we are not bullish on the auto space or high-value consumer ticket but the low ticket is where we will see continued traction in demand.
Srinivas Rao Ravuri, CIO-Equities, PGIM India Mutual Fund