On Thursday, Shares of infrastructure financier IDFC Ltd gave up all their gains as investors booked profits as much as 8.8% after a sharp rally on BSE (Bombay Stock Exchange), one day after the Reserve Bank of India granted a preliminary bank licence i.e. ‘in-principle’ to IDFC, one of the two firms to get the approval.
The approval of licenses for IDFC Ltd (IDFC.NS) and Bandhan Financial Services marks the start of a cautious experiment for a sector dominated by lethargic state lenders, a large number of which are hesitant to venture into provincial regions or towns where saving money infiltration is low. No new Indian bank has been started since Yes Bank in 2004.
At 2.15pm, IDFC started dealing on shares in BSE at Rs.125, down 2% from past close, while the benchmark Sensex fell 0.53% to 22,431.76 focuses. The stock was up 8.7% prior in the day. The stock has picked up 12.95% since 1 November from Rs.112.75 to Rs.127.1, whipping the 5.78% gain in the Sensex.
The organization will hold a press conference session on Friday to talk about its plans for opening another bank. A day after the Election Commission gave its clearance to grant of new licences, RBI’s committee of central board met to deliberate on the two names placed before it and decided to give its in-principle approval.
According to ‘in-principle’ license, the approval for opening a bank is valid till 18 months. During the period of 18 Months, applicants have to comply with the requirements under the guidelines and fulfil the other conditions as may be stipulated by the RBI. If they failed to open a bank then their licences could be cancelled.
According to market analyst, “IDFC will have to bear some initial pain in complying with rules requiring banks to lend to the so-called priority sector, keep a part of its deposits as a cash reserve ratio with RBI and invest in government securities.”