Shriram Group has said that it will seek a banking licence for a new group entity which will focus small-ticket loans and will have a low-cost model.
Speaking to TOI, Arun Duggal, chairman, Shriram Capital said that “We would prefer to apply for a new banking licence with a model for lending to low income families.”
Chennai-based Shriram Group, promoted by R Thyagarajan, has its roots in the chit funds business but recently is a financial conglomerate with Shriram Transport Finance as group flagship. The group also owns Shriram Life and Shriram General Insurance Companies and Shriram City Union â€” a consumer finance business. The group is one of the contenders for a banking licence under the new guidelines issued by Reserve Bank of India.
According to Duggal, the cost structure of existing banks is too high to effecitively service low-income groups and small borrowers. “Even now our focus is on retail our intention is to use technology for servicing loans to low-income families,” he said. Duggal does not see the Rs 500-crore paid-up capital requirement as a deterrent.
“Shriram Capital is in the nature of a financial services holding company and our insurance entities are owned by it. As a group, we are already fully regulated by RBI.” While the group does not see any deterrent in applying for a banking licence, it is still in the process of examining the regulations and does not see any advantage in being the first mover in terms of applying for a licence.
“We are studying the regulations. We have an internal counsel and, if necessary, we will take outside advice and prepare our business plan. We have until July to submit our application and will submit it before then,” said Duggal.