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NBFC to tap parent LIC's infrastructure for setting up bank

MUMBAI: LIC Housing Finance, a subsidiary of state-run Life Insurance Corporation, has worked out a roadmap to apply for banking licence and has completed the basic paperwork. The housing finance company, like many corporates, is awaiting the central bank’s final guidelines to start a bank. “We have appointed an ex-banker for the paperwork. Our basic framework is in place. We are awaiting the final guidelines to apply,” said a senior executive from LIC.

The Reserve Bank of India is expected to come out with the final guidelines for private firms and non-banking finance companies to set up banks. The banking regulator has already laid down norms in a discussion paper, where it talks about the pros and cons of minimum capital requirements for new banks, promoters’ contribution, and caps on promoters’ shareholding and other shareholders and foreign shareholding.

LIC HF, which has 183 branches and 12,000 employees, is planning to tap its parent’s infrastructure for setting up a bank and also plans to hire more people. LIC has 2,500 branches and an agent force of more than two lakh. LIC holds 36.5% stake in the housing finance company while foreign institutional investors hold 32%.

“We will use LIC’s branches. We work in a very different model and have a vast reach. The huge agency force will help us in reaching out to unbanked people,” the executive said.

More than 10% of LIC’s customers do not have access to banks and this could facilitate financial inclusion, said the executive. Though the country’s largest lender, the State Bank of India and its associates have around 15,000 branches, it is not there in several rural areas where LIC is present. LIC is a promoter to a number of lenders. It has strategic stake of 26.32% in Corporation Bank and holds more than 10% in a number of lenders such as ICICI Bank, SBI and Axis Bank.

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