Also read: See fisc cliff deal soon; positive on India: Aberdeen Asset
Below is the edited transcript of his interview to CNBC-TV18.
Q: What is your view on the banking amendment bill?
Srinivasan: This bill paves way for final banking guideline. One should expect final guidelines to come once the bill passes through Rajya Sabha. And thereafter things will be clear how the process will work. We are interested in this space and we will closely monitor the situation.
Q: What would be the best way for an NBFC to start a bank at this point in time? Would it be via starting operations separately, hence merging the NBFC operations or keeping it separately or via M&A route. What could be the most logical way to start with regards to even focusing on financial inclusion as well?
Srinivasan: It will vary from player to player but broadly there will be two types of models. In the first option, NBFC would convert itself in to a bank; this route was also open in the earlier guidelines as well. Second, just apply for bank and continue to keep an NBFC. I think both options remains open in the last set of guidelines that we saw.
Q: What about M&A?
Srinivasan: It may not be an entry step but a subsequent step that players could look at.
Q: Many small banks like Dhanalakshmi Bank, Lakshmi Vilas and Karur Vysya Bank have been running up and has been of course, potential candidates who are likely to get licences but will that be culturally and practically a hostile takeover, an open offer will that become common?
Srinivasan: It may be a possibility. People will have to weigh the opportunity of getting a ready network against setting up anything purely Greenfield. Again it varies from face to face.
Q: In the current business scenario is it so lucrative to get a banking licence?
Srinivasan: Like any other sector of the economy, there will be some advantages and challenges for a new player. In case for bigger numbers, there is still a reasonable opportunity for growth. Compared to the size of the economy banking is still reasonably under bank, and we are relatively quite small to any of the other parts of the world. Overall, there is continuous scope to banking to grow.
In today's business concept going forward the margin will be low compared to what they were earlier. But one look at the financial services sector, 70 percent of the profits, revenues are still in banking. Probably, some of the strongest customer's franchises are banking today.
Q: Who do you think would be the possible or likely candidate to get a banking license? In your opinion what would be the most likely thing the RBI would be looking at with regards to diversified ownership?
Srinivasan: The RBI has talked about diversified ownership. I think listing often provides one with diversified ownership so I don't know whether the will provide further clarity or it will then be up to the RBI to make a judgment as to what will qualify diversified ownership. I think that is really the guiding principle behind their thinking.
Q: What do you think the markets can do in the next quarter or two quarters? Do you think there is substantial positive policy vibes and other vibes to take it past 6,000 mark, another 10 percent gains is there to be had in the next 6 months?
Srinivasan: Once we pass the fiscal cliff, there will be more certainty from an international perspective. Domestically, inflation is looking to come under control and there are expectations of easing interest rate from early next calendar year. I think we should see good momentum in the market.
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