Assocham wants stock broking firms to run banks

November 5th, 2011 - 6:52 pm ICT by IANS  

Bangalore, Nov 5 (IANS) Stock broking firms should be permitted to operate banks as they are monitored by the regulator Securities and Exchange Board of India (SEBI), the Associated Chambers of Commerce and Industry (Assocham) said Saturday.

“Stock broking companies should be considered eligible for a banking license as they are under strict supervision and monitoring of SEBI,” the apex chamber said in a statement here.

Noting that various financial service firms have exposure to broking business, Assocham general secretary D.S. Rawat said it would be logical to keep a benchmark of 10 percent of revenues or assets on prospective basis, instead of retrospectively.

“Brokerage firms can help achieve the objective of financial inclusion as they are spread across geographies and understand the client needs. With good knowledge of financial services industry, stock broking firms can also successfully run banking business,” Rawat said.

Endorsing the Reserve Bank of India (RBI) norm for a paid-up capital of Rs.500 crore to set up a bank, Rawat said the initial capital should be doubled to Rs.1,000 crore in five years to ensure only serious and resourceful entities were eligible for the banking licence.

“At the same time, it will not be pragmatic to mandate a new bank to get listed in two years of granting licence as they will have to develop business and become acceptable in un-banked areas,” Rawat observed and sought to extend the norm to five years.

Appreciating the 49 percent cap on foreign shareholding in new banks for the first five years, the chamber said the status of the limit for foreign institutional investors (FIIs) should be made clear to plan long-term investment decisions.

“Similarly, the guideline to open 25 percent of branches in un-banked areas should be progressive, with 10 percent in first year, 15 percent in second, 20 percent in third and 25 percent in fourth. This will give enough time for new players to stabilise financial viability,” Rawat noted.

The chamber also called for relaxations in statutory liquidity ratio (SLR) and cash reserve ratio (CRR) to encourage financial inclusion as over 60 percent of citizens do no have a bank account.

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