Tatas opt out of race for banking licence

The Tata group has decided to pull out of the race to enter the banking sector and, on Wednesday, announced the withdrawal of its application for a banking licence.

Tata Sons, the Tata Group holding company, on Wednesday wrote to the Reserve Bank of India (RBI), withdrawing its application for a bank licence.

Tata Sons opted to withdraw its application for banking licence since it could not comply with RBI guideline for new bank licences that required all financial services entities in a group to be necessarily owned by a non-operating financial holding company (NOFHC).

To become eligible for a bank licence, as per RBI guidelines, the Tatas would have had to re-organise the existing financial services structure of the group.

Tata group said it has over 1,000 operating companies across multiple sectors and various geographies, with a significant presence outside India and it would be a Herculian task to reorganise all these companies.

''On a detailed evaluation of the 'Guidelines for Licensing of New Banks in the Private Sector' and analysis of clarifications thereto, Tata Sons has reached a conclusion that the group's current financial services operating model best supports the current needs of the Tata group's domestic and overseas strategy, and provides adequate operating flexibility to its companies, while securing the interests of the group's diverse stakeholder base,'' the group said in a release.

''After prolonged deliberations and detailed analysis, Tata Sons has, therefore, decided to withdraw its application dated 1 July 2013, from the current round of licensing,'' the release said.

Tata Sons, however, said it remained committed to financial inclusion and that its existing financial services footprint uniquely positions it to provide technology excellence and access to India's hinterland.

The company said it would continue to monitor developments in the banking space with great interest and looked forward to participating in the banking sector at an appropriate time.

Tata Sons is the second industrial group after Videocon-promoted Value Industries to opt out of the race.

This still leaves 25 other groups in the race for a new bank licence.

The Reserve Bank is expected to announce the final list of eligible candidates for securing banking licences by January 2014.