NBFC's keen to convert into banks - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

NBFC's keen to convert into banks

Feb 5, 2000

Leading Non-Banking Finance Companies (NBFCs) are interested in converting their status to banks. They are exploring this possibility and have consulted the Reserve Bank of India for this purpose. While RBI's views on this are not yet finalised some bankers feel that this conversion can be started off by the merger of a strong NBFC and a private bank.

The main reason for NBFCs being so keen on this change is access to low cost funds. Currently NBFCs cost of funds is around 15%, banks due to their float funds, current and savings account have a cost of funds of around 7%-8%. Also banks are part of the payment and settlement system while NBFCs do not have access to this. However this move would require NBFCs to ensure that the interests of the company and the depositors are not hurt in the bargain. Some NBFCs have hired consultants to give them recommendations on this.

In the long term this move will be good for NBFCs as they will have access to cheaper cost of funds. Also as many NBFCs are not very viable this provides an option to merge with stronger banks. For the banks they would benefit from a larger branch network and the strong brand equity of the leading NBFCs in the retail sector. Banks would also benefit from merging with some strong NBFCs who have high localised business presence and the banks will be able to encash on this and build it up further. From the depositors viewpoint they would suffer as they will have to put their deposits into banks which pay lower interest rates. However the stronger regulations for banks will make them safer for depositors.

In a related development the RBI has decided to provide some relief to NBFCs if their net owned funds fall below the below the stipulated Rs 2.5m. They will not face any immediate deregistration and instead will discontinue their NBFC business and try to restore the net owned fund limit within a time frame.

Equitymaster requests your view! Post a comment on "NBFC's keen to convert into banks". Click here!

  

More Views on News

REPCO HOME Share Price Down by 7%; BSE 500 Index Up 0.5% (Market Updates)

Apr 13, 2021 | Updated on Apr 13, 2021

REPCO HOME share price is trading down by 7% and its current market price is Rs 292. The BSE 500 is up by 0.5%. The top gainers in the BSE 500 Index are GUJARAT ALKALIES (up 11.6%) and BANK OF MAHARASHTRA (up 9.0%). The top losers are REPCO HOME (down 6.5%) and COFORGE (down 6.6%).

MOTILAL OSWAL Share Price Down by 7%; BSE 500 Index Up 0.4% (Market Updates)

Apr 13, 2021 | Updated on Apr 13, 2021

MOTILAL OSWAL share price is trading down by 7% and its current market price is Rs 655. The BSE 500 is up by 0.4%. The top gainers in the BSE 500 Index are GRAPHITE INDIA (up 7.3%) and GIC OF INDIA (up 6.4%). The top losers are MOTILAL OSWAL (down 6.6%) and 3M INDIA (down 7.4%).

HDFC Announces Quarterly Results (3QFY21); Net Profit Down 65.1% (Quarterly Result Update)

Feb 3, 2021 | Updated on Feb 3, 2021

For the quarter ended December 2020, HDFC has posted a net profit of Rs 29 bn (down 65.1% YoY). Sales on the other hand came in at Rs 116 bn (down 42.2% YoY). Read on for a complete analysis of HDFC's quarterly results.

Indian Railway Finance Corporation IPO: Should You Apply? (IPO)

Jan 18, 2021

Monopolistic railway financer with impeccable asset quality.

CAMS IPO: Should You Apply? (IPO)

Sep 18, 2020

Does the company having 70% market share of the mutual fund registrar business have sound prospects?

More Views on News

Most Popular

My Recent Recommendation Will Profit from the Global Supply Chain Crisis (Profit Hunter)

Mar 31, 2021

A tiny chemical company, started in the Licence Raj era, is a great example of a new wealth creating opportunity.

My Stock Trading Strategy (Fast Profits Daily)

Mar 31, 2021

In this video I'll show you exactly how I go about picking stocks for trading.

4 Stocks to Make Your Portfolio Immune to the Second Covid Wave (Profit Hunter)

Apr 6, 2021

Rather than predicting the market, successful investing is more about preparing well and placing your bets accordingly.

If the Market Falls, I Will Do This... (Fast Profits Daily)

Apr 1, 2021

What should you do if the market falls? In this video, I'll tell you what I will do.

India: Recovery Stalled by Vaccine Games? (The Honest Truth)

Apr 13, 2021

Ajit Dayal on how India's vaccine strategy will impact the markets.

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

COMPARE COMPANY

MARKET STATS