India Non-Bank Lenders Rise on New Licensing Rules: Mumbai Mover

L&T Finance Holdings Ltd. (LTFH) led India’s non-bank lenders higher in Mumbai trading after parliamentary approval of laws that give the Reserve Bank of India more freedom to issue bank licenses.

L&T Finance jumped as much as 5.2 percent to 97.4 rupees, the highest since listing in August 2011, and traded at 94.5 rupees as of 12:03 p.m. Mahindra & Mahindra Financial Services Ltd. (MMFS) rose 1.6 percent to 1,096 rupees and Bajaj Finserv Ltd. (BJFIN) gained 1.6 percent.

The new banking laws also include raising limits on voting rights for shareholders in state-controlled lenders and allow the banks to raise capital through rights offerings. Yesterday’s approval ends a two-year process that may lead to more banking competition for State Bank of India (SBIN), the country’s largest, and ICICI Bank Ltd. (ICICIBC), its biggest private lender.

“This would pave the way for the RBI to issue much-awaited new banking licenses for which a lot of non-bank financial companies have been queuing up,” Deven Choksey, managing director at Mumbai-based K.R. Choksey Shares & Securities Pvt., said by phone. “An increase in voting rights would mean better investor representation in lenders, especially state-owned banks, which can attract investment into the sector.”

The final rules for banking permits will be issued after the central bank has received the additional regulatory powers, Governor Duvvuri Subbarao said last month.

Given the criteria set by the RBI, L&T Finance and Mahindra & Mahindra have a strong chance of getting licenses, Antique Stock Broking Ltd. analysts led by Sunesh Khanna wrote in a note dated Dec. 11.

Under the rule changes, the limit on voting rights of shareholders in state-run banks was raised to 10 percent from 1 percent, and in other lenders to 26 percent from 10 percent.

To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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