Tata Group rethinks & plans to withdraw from banking business
ECONOMY & POLICY

Tata Group rethinks & plans to withdraw from banking business

The Tata Group has rethought its banking business plans and might potentially abandon them.

After a working committee of the Reserve Bank of India (RBI) advised issuing banking licences to industrial firms in November 2020, the group contemplated moving into banking through Tata Capital, its financial services subsidiary.

They claim that even while the laws for non-banking financial firms (NBFCs) and banks are convergent, there is still a benefit to being an independent finance company since banks' operational costs are substantially greater.

The largest difficulty for Tatas will be ensuring compliance at the corporate level, as almost a thousand balance sheets would need to be examined for related-party activities. Tata Neu, the group's consumer app, has a licence to operate a payment gateway.

Tata Capital is the holding firm for Tata Capital Financial Services, Tata Capital Housing Finance, and Tata Cleantech Capital, as well as three investing and consulting businesses: Tata Securities, Tata Capital Singapore, and private equity funds. With a revenue of more than 10,000 crore, Tata Capital has been limiting its exposure to corporate loans and focused on retail loans to keep credit costs low and accelerate digitalization.

The RBI has also suggested that NBFCs owned by industrial firms with assets of above 50,000 crore be transformed into banks. Banks, unlike other financial institutions, must maintain a cash reserve ratio, invest more in government bonds, lend to priority sectors such as farmers, students, and exporters, and hire competent bank employees.

The RBI's internal report, which recommended that industrial houses be granted banking licences, also recommended changes to the Banking Regulations Act, such as placing restrictions on related-party transactions and strengthening conglomerate supervisory mechanisms, including consolidated supervision, for large conglomerates.

Image Source

The Tata Group has rethought its banking business plans and might potentially abandon them. After a working committee of the Reserve Bank of India (RBI) advised issuing banking licences to industrial firms in November 2020, the group contemplated moving into banking through Tata Capital, its financial services subsidiary. They claim that even while the laws for non-banking financial firms (NBFCs) and banks are convergent, there is still a benefit to being an independent finance company since banks' operational costs are substantially greater. The largest difficulty for Tatas will be ensuring compliance at the corporate level, as almost a thousand balance sheets would need to be examined for related-party activities. Tata Neu, the group's consumer app, has a licence to operate a payment gateway. Tata Capital is the holding firm for Tata Capital Financial Services, Tata Capital Housing Finance, and Tata Cleantech Capital, as well as three investing and consulting businesses: Tata Securities, Tata Capital Singapore, and private equity funds. With a revenue of more than 10,000 crore, Tata Capital has been limiting its exposure to corporate loans and focused on retail loans to keep credit costs low and accelerate digitalization. The RBI has also suggested that NBFCs owned by industrial firms with assets of above 50,000 crore be transformed into banks. Banks, unlike other financial institutions, must maintain a cash reserve ratio, invest more in government bonds, lend to priority sectors such as farmers, students, and exporters, and hire competent bank employees. The RBI's internal report, which recommended that industrial houses be granted banking licences, also recommended changes to the Banking Regulations Act, such as placing restrictions on related-party transactions and strengthening conglomerate supervisory mechanisms, including consolidated supervision, for large conglomerates. Image Source

Next Story
Infrastructure Transport

RVNL wins North Eastern Railway bridge project worth Rs 1.66 billion

Rail Vikas Nigam Limited (RVNL) announced on 27 October that it has emerged as the lowest bidder (L1) for a significant infrastructure project awarded by the North Eastern Railway, as part of its routine business operations. The project involves the construction of the substructure for Important Bridge No. 50, which will comprise 14 spans of 61 metres each. It will feature a Double D-type well foundation designed for a double line and adhere to the RDSO 25T axle loading standard. The bridge will be built over the river Gandak, situated between Paniyahwa and Valmikinagar stations, as part of ..

Next Story
Infrastructure Transport

Northern Railways plans direct Kashmir link with India

Following the successful launch of twin Vande Bharat trains on the Srinagar–Katra route, marking the completion of the Udhampur–Srinagar–Baramulla rail link in June, Northern Railways is now working towards providing direct rail connectivity between Kashmir and the rest of the country, an official has confirmed. Senior Divisional Commercial Manager of the Jammu Division, Uchit Singhal, said that efforts are underway to resolve operational and security challenges to achieve this milestone for Jammu and Kashmir. Speaking to PTI after introducing a two-minute stoppage for the semi-high-sp..

Next Story
Infrastructure Transport

Railway Board approves new station at Nedumbassery airport

The Railway Board has approved the construction of a new railway station at Nedumbassery, fulfilling a long-standing demand from air passengers using the Cochin International Airport. Union Minister George Kurian’s office announced on Wednesday that the decision marks a major step towards enhancing rail connectivity to the airport, which serves as one of southern India’s key transport hubs. According to the statement, Kurian had earlier met Railway Minister Ashwini Vaishnaw, who assured him that the project would be expedited. The plan gathered momentum following Vaishnaw’s visit last ..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Talk to us?