Cos getting banking license will come under financial pressures: Kunj Bansal

In an chat with ET Now, Kunj Bansal, ED & CIO – Centrum Wealth Management Ltd, shares his views on Banking licenses, Excerpts:

ET Now: A lot of these bank licence candidates the ones which have been talked about the likes of IDFC, LIC Housing Finance really spurting up a lot, do you like any of the stories?

Kunj Bansal: One will have to take a long term call because as we all know that whichever of these companies gets a banking licence, initially their business models or rather their finances will come under pressure which is very clear given the regulatory requirement of CRR, SLR and such other things.

There will be lot of upfront expenditure in terms of hiring people, in terms of opening branches, in terms of setting up larger regulatory and compliance mechanism. Let us keep in mind that regulators have become quite strict over the last few years and as a result for the whole financial services space banking, NBFCs, microfinance, gold finance, brokerages, asset managements, insurance companies meeting the regulatory requirements has become critically significant, which has resulted into increased cost.

So these are the factors which will impact their performance negatively in the short term, add to that the fact that at least hopefully there will be four-five licences so to that extent there will be competitive pressure. The existing players, the incumbents would not let go of their business so easily so they will keep putting pressure and they will have an upper hand because they are already there in the business.