Tata Sons, the holding company of the Tata Group, is the second private business house to withdraw its application for a banking licence, as it saw the move coming in the way of its international operations which provide about 64% of its revenue.
A press statement issued by the Reserve Bank of India said it had accepted the application withdrawal request.
The RBI
said that the company had indicated that its current financial services
operating model best supported the needs of the Tata Group's domestic
and overseas strategy, and provided adequate operating flexibility to
its companies, while securing the interests of the group's diverse
stakeholder base.
Elaborating the reasons, a Tata group spokesperson said post its
application on July 1, the group carried out a detailed evaluation of
the guidelines and analysis of clarifications and found that group
companies with overseas operations at times needed to provide financing
solutions to their customers.
Since all financing companies in the group needed to be under the
non-operative financial holding company (NOFHC), there could be
situations, wherein a given country was not a priority for the proposed
bank/ NOFHC, but extremely important for an operating company.
“An equitable framework needs to be agreed on how some of these
situations will be addressed. Overseas financing is further complicated
as the law in some countries require the operating company to partner
with a local bank to set up a financing company. Compliance of such
requirements would not be possible under the existing guidelines wherein
all financial services entities in the group necessarily need to be
owned by the NOFHC and no group company can have a direct shareholding
in entities. Whether such a restructuring would be of value to operating
companies was also a question that was examined,” Tata Sons said.
The spokesperson said RBI’s clarifications on its queries had come on
June 3 while the last date for filing the application was July 1,
leaving hardly any time to consult all its operating companies to take
the right decision.
Hence it had applied for the licence, clearly mentioning that any change
in the legal shareholding structure would be subject to all regulatory
and internal corporate approvals as required by the transferring company
and the company whose shares were being transferred.
The group however has kept the window open for a banking foray in future
by saying that Tata Sons believed that solutions for each of these
issues could and would be found in the long run. “The company shall
continue to monitor developments in this space with great interest and
looks forward to participating in the banking sector at an appropriate
time," the statement added.
Tata Sons' application was made along with others such as Aditya Birla
Nuvo, Bajaj Finance, L&T Finance, and Reliance Capital. Later on 3rd
September the RBI said that Chandigarh based K C Land & Finance had
also applied for the license on 1 July but was inadvertently not
included in the list of applicants.
Venugopal-Dhoot promoted Value Industries had withdrawn its application
earlier. With Tata Sons withdrawing, the total number of applicants for
banking licence has shrunk to 25.
Earlier Mahindra and Mahindra group had announced its plan to not apply
for the banking licence citing guidelines not favouring large
non-banking finance companies such as Mahindra Finance.
