L&T on banking licence: 25% rural branches may not be viable

L&T group, a serious contender for a new banking licence, today expressed doubts over the viability of new banks having 25% of their branches in rural areas as prescribed in the RBI draft guidelines.

L&T Finance Holdings also asserted that the company would consider definitely the prospect of entering the banking space.

"It is not easy to say that rural branches are viable or not. Is there any other mode of servicing the rural clients without the normal brick and mortar banks? These are areas that we really need to work on," L&T Finance Holdings President and Whole-Time Director N Sivaraman said.

He was replying to a question whether the 25% stipulation for rural branches would deter the aspiring entrants.

"All those evaluations will have to be completed. We definitely need to do a thorough evaluation on whether it will be worthwhile at this point of time," he added.

However, Sivaraman quickly added, "I will not say that we are not interested. Definitely, as a financial services player, that is of great interest to us, and we will actively consider the prospect.

"I think, it is an opportunity that is important for a financial services player. So we can not ignore it. We will have to wait for the final guidelines to come out. Once RBI announces its final guidelines we will definitely work on it," he said replying to a query on whether the group will pursue entering the banking space given the strict entry norms.

The Reserve Bank last month had issued the draft guidelines on new bank licences, pegging the minimum required capital for the holding company at Rs 500 crore, and limits the foreign shareholding at 49%.

The draft guidelines also said new banks should open at least 25% of its branches in unbanked rural centres.

Source: Business Standard