Reliance Capital arm prepares for banking licence

Reliance Commercial Finance (RCF), the non-banking finance arm of Anil Ambani-led Reliance Capital, is gearing up to meet the required guidelines and norms that would be required for it to into turn a bank. With the government and the Reserve Bank of India expected to issue the final guidelines for new banking licenses shortly, many non-banking finance companies such as Reliance Capital, Shriram Capital and LIC Housing Finance are lining up to seek banking licence. Reliance Commercial Finance, which offers secured loans such as mortgages, business loans for SMEs, vehicle loans and infrastructure finance, will be the group’s likely candidate to turn into a bank, if the Reliance ADA Group acquires a banking licence, say experts in the banking sector. The company had a loan book size of Rs 13,927 crore as of September. “We need to wait for RBI’s final guidelines to see how it all pans out. The draft guidelines provide many options, including conversion. But we will wait and see how things work out before taking a call. From the draft guidelines perspective, we are fairly compliant,” said KV Srinivasan, CEO of Reliance Commercial Finance, said at a media event in Panaji, Goa. Unlike other NBFCs that treat loans that are 180 days past due date as bad loans, RCF considers loans that are 90 days past due as bad loans, akin to banks, he said. Like banks, the company is also preparing itself to meet IFRS accounting standards, much ahead of other NBFCs, Srinivasan said. “We are starting the journey towards IFRS. As and when the CA Institute initiates the guidelines, we should be prepared for it for our own purposes. When IFRS becomes the global standard for banks, we should be compliant. NB-FCs are expected to be IFRS-compliant by 2014-15,” he said. The draft guidelines for banking licences also specify that companies applying for banking licences should not derive 10 per cent or more of their income from stock trading activity. As of September 30, broking income constituted less than 10 per cent income of the parent company, Reliance Capital, he said.

FC