An entity's failed attempt at getting a bank licence will not have any bearing on its move to pick up a large share-holding in an existing bank, newly-appointed RBI Deputy Governor R Gandhi said today.
His comments come against the backdrop of reports that L&T Finance is eyeing a significant stake in private sector lender Yes Bank .
"They might be rejected for bank licence, but as a share-holder if they are going to come, we will examine that. It won't be a bar just because its (banking) licence has been rejected," he told reporters on the sidelines of an IMC event here, without naming L&F Finance.
Gandhi, who got promoted as Deputy Governor last month, was replying to a question as to whether an NBFC, which might have failed to secure a banking licence in the last round, will be eligible for picking a stake in a bank.
The Deputy Governor, in-charge of banking operations and development, said that anybody looking to have over 5 percent stake in an existing bank has to get an approval from the Reserve Bank, which will look at the merits of the case.
"We will look at the fit and proper (criteria); normal due diligence will be applied and based on that, decisions will be taken. It is not that we are pro or against a particular group or a company," Gandhi added.
Some media reports last month had said L&T Finance, the financial services arm of the engineering giant Larsen & Tubro , is looking at either picking up promoter's stake in Yes Bank or merging with it.
Yes bank is caught up in a legal battle with one of its promoters and current MD Rana Kapoor and the other promoter's widow Madu Kapur, over board nominations. While Kapoor holds a little over 13 percent in the bank, Madhu has close to 12 percent stake in the bank.
L&T Finance had failed to make the cut in the latest round of licencing where IDFC and MFI player Bandhan were granted in-principle nod to set up banks . Therefore, some critics have termed L&T Finance's bid to buyout or pick some stake in Yes Bank as "backdoor entry" into the banking sector.
Gandhi said: "What is the backdoor entry? At a time if they want to acquire over 5 percent, then the applications will come, the bank will be forwarding that and then we will apply or mind."
On the possibility of India Post getting into the banking fray, which is among the entities whose application has been kept in abeyance; Gandhi said the government is in discussion with the RBI on it.
After the issue of the licences last month, RBI Governor Raghuram Rajan had said that possibly some of the two dozen applicants were more suited for operating differentiated banks, rather than running universal banks.
Additionally, the central bank is mulling to make licences available "on-tap" rather than making the process a once in a decade as is the practice right now.
Gandhi said RBI will be coming out with final guidelines on both differentiated licensing and on tap licensing this year.
He declined however to quantify the time which will be taken for an applicant to land a licence, asking everybody to wait for the final guidelines.
On the asset quality of banks, which has hit a record high last fiscal at close to 6 percent, Gandhi said he hopes the high incidence of loans turning bad will improve in future due to the steps being taken by the banks.
"The hope is definitely the market will be improving, asset quality will also be good because of the various efforts the banks are continuously taking that should pay off to bring the asset quality back to normal," he said.
On the need for banks to raise more capital in the run up to migrating to the Basel-III framework, Gandhi said there is a need for banks to look at more innovative ways of capital raising.
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