Regional NBFCs like Delhi-based SE Investments eye switch to small banks

MUMBAI: At least three lesser known, but regionally strong non-banking finance companies, including Delhi-based SE Investments, Jalandhar-based Capital Local Area Bank and Punjab based PKF Finance are preparing to apply for a small bank licence.

The central bank issued guidelines for small and payments bank licences last week and set the entry capital required to set up a bank at Rs 100 crore.

“We are considering applying for a small bank licence,” said Sunil Agarwal, MD, SE Investments.

The company, which started operations in 1992, has an asset base of Rs 1,000 crore with 42% of the loans below Rs 25 lakh.

RBI has stipulated that at least 50% of an NBFC's loan portfolio should constitute loans and advances of up to Rs 25 lakh in order to lend primarily to micro enterprises.

“We are looking at applying for a small bank licence,” said Alok Sondhi, MD, PKF Finance.

“We are weighing the merits and low-cost fund is a big advantage.”

The company started operations in 1958, and has a presence in Punjab, Haryana and Delhi. It has a turnover of Rs 341 crore as on March 31, 2014. Capital Local Area Bank is keen to apply for a small bank licence. “We will definitely be applying for a small bank licence,” said Sarabjit Samra, MD, Capital Local Area Bank.

“We lend to small businesses and are well above RBI's requirement of a ticket-size of Rs 25 lakh for over 50% loan portfolio.” The company has a net worth of Rs 97 crore, and total business of the bank is overRs 2,155 crore. It has 34 branches.

Existing NBFCs, micro finance institutions, and local area banks can convert to small banks after complying with all legal and regulatory requirements. The central bank has said that it would put the licensing process on the fast track to drive the country's financial inclusion agenda and be a lot more liberal in allocating licences.