Shares of financial companies, including banks, non-bank financial companies (NBFCs) and microfinance institutions (MFIs), were in the spotlight amid a rally of up to 20% in BSE in the morning trade of Monday as the Reserve Bank of India (RBI). The internal task force, which reviewed the ownership guidelines, proposed radical changes in the corporate structure of Indian private sector banks.
Key recommendations that have been suggested include increasing the promoters’ participation limit to 26 percent from the current 15 percent, considering NBFCs with an asset size of more than Rs 50 billion and large industrial companies to apply for a banking license, clarity on the financial company not operating. (NOFHC) structure that provides financial outflow without group entities. Comments on the report must be submitted by January 15.
Among individual stocks, Equitas Holdings and IDFC were locked in the 20 percent upper loop at Rs 63.40 and Rs 40.10, respectively, on the BSE. Ujjivan Financial Services, Ujjivan Small Finance Bank, IDFC First Bank, AAVAS Financiers, Shriram City Union Finance, Bajaj Holdings & Investments and IndusInd Bank all rose 5% to 16% on the BSE. By comparison, the S&P BSE Sensex was down 0.06% to 43,855 points as of 10:00 a.m. M.
ICICI Securities believes that these steps are in the right direction and would be beneficial to clients and the banking industry as a whole in the long term. However, the recent rally in the price of finance shares has had positive short-term effects, he said.
The Nifty Bank and Nifty Financial Sector indices trimmed earnings later, falling 0.45% each after advancing nearly 1% and 0.7%, respectively, in early trading.
In the past five years, private sector banks have rapidly gained market share to around 30 percent (2020) from around 18 percent (2015), and we see this trend accelerating at a faster rate now, analysts at Motilal Oswal Financial Services said. in sector update.
“M&A opportunities may also increase in the system, as companies with deep pockets can take this route rather than build from scratch. Fitness and fit criteria, increased vigilance of group entities, maximum allowable participation of promoters and the regulatory cost of CRR, SLR, etc., have been the key considerations thus far in applying for and granting banking licenses, “he said.
The brokerage firm further said that it remains to be seen how corporations India, NBFC and the RBI will address the matter this time around, once final guidelines are released. Prima facie, we see IDFC Ltd, Bajaj Finance, L & TFH, Equitas and Ujjivan as key beneficiaries.
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