According to a release by Reserve Bank of India, Tata Sons has withdrawn its application for a banking license and central bank has accepted Tata's request .
Parekh says it is unlikely that rules or guidelines will be changed because that would be a very lengthy process but does seem to think that RBI has missed out something somewhere.
Below is the verbatim transcript of his interview on CNBC-TV18
Q: Have they withdrawn because it is very unremunerative for big groups? We saw that Mahindra's also had not applied. Do you think there will be more such causalities?
A: I would not know why Tata Sons have decided to withdraw but by and large you did get a sense when the clarifications were rendered to the guidelines. The guidelines, and then the clarification suggested that conversion of non-banking financial companies (NBFC), particularly large-sized NBFCs would be very difficult to meet with within the guidelines which were offered in June 2013.
In keeping with that you are getting a sense that perhaps some of the NBFCs may have failed, they are better off continuing as NBFCs rather than converting as a bank, so that could be one reason.
Second of course is that there is going to be a larger oversight from the RBI in case of large particular groups who will apply for the banking license and form the non-operating finance holding companies.
Q: Do you think that therefore there could be more such casualties? Would the Birla Group also want to withdraw? What about companies like Shriram Transport - there also the conversion would mean serious restructuring and perhaps loss of business, perhaps earning the ire of investors. So, do you see more casualties from these two spaces - the big conglomerates and these very well functioning NBFCs?
A: Initially we thought that this reform was to help corporates, and capital coming in from large corporates, with very large reputation and with good presence in the Indian economy. Now with the withdrawal of two prominent corporates this reform seems to be taking a different shape altogether.
Q: Is there any chance that rules itself will be tweaked? Or that the committee under Dr Jalan will not want to open a Pandora's box of litigation, so changes in rules are unlikely at this juncture?
A: Changing of the rules has become very difficult because the whole process will have to be re-entered etc which becomes too lengthy a process.
Q: Are there chances that others in the list may follow the Tata example?
A: The fact does remain that the core object with which the entire reform was being carried out and then a lot of deliberations happened and finally the guidelines - now the applications, and the withdrawal of the large corporates does suggest that they seemed to have missed out something somewhere.
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