To start working on biz recast as early as April 3: IDFC

Written By Unknown on Rabu, 02 April 2014 | 23.25

The Reserve Bank of India has granted an in-principle nod for banking licence to IDFC .

The "in-principle" approval will be valid for a period of 18 months during which the applicant has to comply with the requirements under the RBI guidelines.

Welcoming the news, IDFC Executive Chairman Rajiv Lall said that their goal is to build a 'universal banking franchise'. He expects the company to comply with all RBI conditions.

Speaking to CNBC-TV18, Lall said IDFC already has 21 percent Tier-1 capital and he believes it 'will be the best capitalised start-up bank in India'. IDFC has 18 months to start banking operations.

Elated by the news, Lall hopes to start working on the business restructuring as early as April 3. The company already has a detailed plan in place to kick start operations and wants to 'get ready with branch network'.

Lall said though the company is looking at organic growth entirely for the banking franchise, yet it would be premature to speak of its business model currently. He sees the lack of branches as an opportunity and not a constraint.

Below is the transcript of Rajiv Lall's interview with CNBC-TV18's Shereen Bhan.

Shereen: We don't know exactly what the caveats or the conditions will be that the Reserve Bank of India (RBI) will finally put forward. We just heard the Banking Secretary talk to us about some of them but in your assessment do you believe that these are going to be constraining or very difficult to comply with? 

A: It is not going to be easy, it is going to be hard work. However, we have a long-term perspective; I expect longer than most and therefore we believe that a banking franchise needs to be build deliberately, thoughtfully and brick by brick. So, we will get on with it.

Shereen: Speaking of getting on with it banking operation will also require capital. Can you share with us ideas and thoughts on that?

A: That is one thing that we are not lacking. As IDFC today we already have 21 percent tier 1 capital. Since we will be executing our transition from a non-banking financial company (NBFC) to a bank, we will be the best capitalised start-up banks in India of the recent decades.

Shereen: How soon will this process start? You talked about building this brick by brick but you have now got the in-principle nod from the RBI. Can you take us through what happens from hereon and how soon can we expect things to get started?

A: We have 18 months to start operations. We have a very detailed plan of action to make us mission ready so to speak. So, that is what we will perceive.

Shereen: Could you take us through the mission so to speak as far as IDFC is concerned to be bank ready?

A: To be bank ready we have to be fully compliant with the regulations and that has aspects of legal structuring that needs to be taken care of; mostly just that. There is a transfer of assets that will have to happen. So, these are all boring things but they are time consuming and require focused execution. We will have to get ready for our branch network; all those kind of things we will have to start working on.

Shereen: In terms of the transfer of assets and the other somewhat complex restructuring that this entails how soon do you hope to get started with that and what is going to be the process from hereon? By when do you hope to get over and done with the transfer of assets?

A: We will start working on this tomorrow. The whole structure has to be compliant within 18 months. So, that has a number of legal steps that are involved because we are already a listed entity and our goal is to have a startup bank that will also be listed day one. So, that has a certain amount of process involved that we will have to now pursue.

Shereen: You were taking us through the plans as far as the branch network is concerned. That is not the boring stuff so give me a sense of what that entails?

A: I will share that in the fullness of time. I am reluctant to unveil on my very first conversation about the contours of the business plan. However, needless to say it is our goal to build a universal banking franchise over time which will require us to build an appropriate branch network that goes with it.


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