Nirmal Jain, Chairman & CEO of IIFL Finance, on Monday said that converting into a bank is a huge drain on the profitability of NBFCs. The comments came after RBI's internal working group recommended that large and well-run NBFCs can be converted into banks if they fulfill certain conditions.

"Well run large NBFCs, with an asset size of Rs 50,000 crore and above, including those which are owned by a corporate house, may be considered for conversion into banks subject to completion of 10 years of operations and meeting due diligence criteria and compliance with additional conditions specified in this regard," said the panel.

Speaking about the big bank reforms, Jain, in an interview with CNBC-TV18, said, “IIFL Finance has assets under management (AUM) of Rs 40,000 crore, so cannot apply for banking licence yet.”

According to him, meeting priority sector, cash reserve ratio (CRR), statutory liquidity ratio (SLR) norms from day one of becoming a bank will be challenging.

“Internal working group's recommendations on new bank licences are positive and it’s positive for IDFC, Equitas as there was irrational holding company discount,” he added.

On business front, he said, “Liquidity has eased for our finance business. Things are easing and getting better and loan growth is picking up but one needs to be cautious.”

For full interview, watch the video

First Published:Nov 23, 2020 11:15 AM IST