BANKING LICENSE PITCH

The current approach of the government is to support rural growth to bridge the gap between Urban
and Rural Development. Therefore the Government talks of inclusive banking, NREGS scheme and
rural upliftment.What is the role one should expect from a Non Banking Financial company(NBFC)
which is semi-urban or rural focused? Should they do anything different from what normally an NBFC
would be expected to do? After a very long time, the central bank has recognized the importance of
NBFCs. Is there room for discussing what really NBFCs can do? The Finance Minister has said in his
budget speech that NBFCs would now be considered for a banking license. RBI will set up a new com-
mittee to assess the need for additional banks.

When a banking license is to be approached for, what should be the pitch by an NBFC given the
current scenario where there is no dearth of banks in the urban sector ranging from Nationalized
banks to new private bank? Does it make sense to be one more bank? If not, then for Mahindra Group
(whose focus in financial sector is very different from everybody else), is there a room to pitch them-
selves very differently to get this license under the new scheme? What is that difference we should
make to influence the decision in our favor? How do we create the need for a new bank? How do we
influence the assessment committee? How should it be different from the current banks? How do we
play the role of an influencer to RBI to think in our direction?

Currently there are two regulatory requirements to apply for a banking license (a) Networth of INR
300 crores and (b) Should not be an industrial house. The first one is positive and attainable as it is a
monetary norm but the second is a negative norm for the reputed industry houses of the country.
While an unknown person can set up a banking system, a reputed industry house cannot! A foreign
bank can come and set up a bank in India while a strong industrial house cannot set up a bank here!
Provide an argument focused on how these are the wrong regulations and how they can be turned
around to still meet the objectives of the RBI for the reason they have kept these regulations and do
it in such a way that the reputed industry houses can utilize this opportunity.

The networth criterion of INR 300 crores is small in the current scenario. How you can make this crite-
rion stringent that only the most deserving and the most focused will come into this? How do you
argue in such a way that you are still able to create a differentiator between the industry houses in
India? (Would you like to say that 80% of the business should be generated from rural India?) How
should it serve the government’s purpose of inclusive banking? Recommend the regulatory changes
that would favor the Mahindra Group while being not too explicit or apparent?

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 RURAL HOUSING
Indian Urban Housing History shows that it was credit provision which actually grew the housing
industry and made many employed people eligible to have their own shelter. Otherwise the depend-
ence for housing was either on the government (if you are a government employee) or rented shelters
and therefore the housing wealth was in people’s hands. HDFC bank changed the entire paradigm of
owning a house and therefore middle class families became eligible. How do you replicate this
concept to rural India where the need for shelter is very high but the credit availability is at its lowest?
What should be the strategy to create a HDFC like set up for rural India given the entire rural land-
scape challenges like Land ownership challenges, Family Decisions, Ability to service the loan, Fund-
ing awareness etc.

RURAL INVESTMENTS
Rural dependency of investment is in routine products like Fixed deposits, Post office savings or gold
buying. How do we take Urban products to rural financial market given its nature of complications and
still create products which are very simple and understandable by the rural population? How do you
make the 60% rural population believe it as a good opportunity for investment?

RURAL CREDIT SCORECARD

Many of us continue to believe that in rural market there are no financial statements or banking
habits. The entire lending is on the basis of that understanding. Is there an intellectual credit score-
card model or a scorecard matrix which can be developed for rural India which will make credit reach
to the rural market by many banking players in the market? Is there any way to get rural population
rid of moneylenders’ clutches? It is a mega government initiative to do this but if private entrepre-
neurs could do this, they can leverage the benefit of market skimming.

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 CASH DRIVEN RURAL ECONOMY

The rural economy is cash driven. All day-to-day functions are cash intensive. To meet the demand
pan-India, every month Mahindra Finance has to handle hard cash of Rs. 500 crore. Is there any tech-
nological solution to manage money? And is there any technology solution to convince customers to
transact through bank instead of cash? Can we design a product which is wanted by the rural
customer? Like we have an ATM to withdraw money, can there be a facility to deposit money? So
instead of Mahindra going to the customer and asking for deposits, can we set up 5000 such
machines all across the country where rural customers can pay installments? It would be convenient
to both ends. This machine should have the ability to reject duplicate currency and it should be able
to provide a printed receipt of the payments made so that the customer feels happy receiving an
acknowledgment.

OPPORTUNITIES & CHALLENGES

Considering the Mahindra Financial Sector business model and the challenges they face, could you
recommend what spaces of financial services should they look for? Can we create a differentiator in
such a way that they progress in the market while others find it difficult to get into it? What would be
the strategy to become the India’s only ‘Rural Credit Bank’? The solutions should be around the
following criteria: Product design, should have ability to tackle political pressures, crop based chal-
lenges, circumstantial challenges, Human Resources, Training/Recruitment, Technology to deliver
results even on mass basis etc.

PARALLEL BANKING IN RURAL INDIA

Urban India has many opportunities like Insurance, AMC, etc. eventually leading to be an equivalent
of the Banking System. How does one create similar parallel banking in rural India given the chal-
lenges?

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 INNOVATIVE FINANCIAL OFFERINGS

How do you synergize the Group products to create an innovative offering package that is unique in
the market place and it positions the product untill it stabilizes to become self sustaining and
successful? For example, as Logan has become a Mahindra product, how do you utilize the Group
synergies to reposition Logan and Mahindra as a leading car manufacturing company through innova-
tive financial offerings?

MAHINDRA FINANCE POLICIES

Financial Services has an internal restriction that they cannot sell more than 40% of their business to
the Mahindra Group. For example if Mahindra Auto sells 100 cars then Mahindra Finance can provide
services to only 40 cars. Mahindra Finance has to look outside for the rest 60% of the revenue. This
restriction is to avoid over dependency on each other. Is there any merit in breaching this restriction?

Is there any merit in not providing services to Mahindra Group’s competitors? Or is this a good strat-
egy not to support competitor’s products, which helps your parent company products to be well posi-
tioned?