Banks in focus

As expected, today morning, the market has today reacted positively to the proposals from the internal working group of RBI, which permits corporate entry into banking, allowing promoters to keep intact their high stake and allowing NBFCs to get converted into banks.

The top gainers currently are Equitas, Ujjivan, IDFC and J&K Bank. More than NBFCs, these smaller banks are in the limelight as one of the proposals was to allow Non-operative Financial Holding Company (NOFHC) to remain as the preferred structure for all new licenses to be issued for universal bank while stating that banks, which are currently under the NOHC structure may be allowed to exit from such a structure if they do not have other group entities in their fold.

While banks licensed before 2013 may move to an NOFHC structure at their discretion, once the NOFHC structure attains a tax-neutral status. These banks then should move to the NOFHC structure within 5 years from announcement of tax-neutrality.

This is expected to be very positive for some of the holding companies as the discount on the holding company, is likely to come down sharply.