Shares of several non-banking financial companies (NBFCs), which are prospective candidates to get new banking licences from the Reserve Bank of India (RBI) shot up on Monday after the central bank put out the draft guidelines for new banks in India. Shares of Religare Enterprises fell 0.24 per cent after the detailed eligibility norms barred companies with significant presence in broking business from getting new bank licences.

Stocks that stole the limelight were Bajaj Finserv (up 14.42 per cent), IFCI (11.25 per cent), L&T Finance Holdings (10.29 per cent), SREI Infra (8.32 per cent), Reliance Capital (9.72 per cent) and Aditya Birla Nuvo (7.42 per cent).

Other gainers from the NBFC space were Cholamandalam Investment and Finance Company (4.44 per cent), Shriram Transport Finance (4.27 per cent), Power Finance Corporation (5.23 per cent), Future Capital Holdings (3.67 per cent).

Ajay Parmar, head of institutional research at Emkay Global Financial Services said, “Reserve Bank of India has opened the gates for a number of industrial houses to get into the banking sector, especially those who are already in financial services. Banking will now become competitive similar to countries like the US, where there are hundreds of banks.”

At the same time, Reserve Bank of India has tried to maintain a level-playing field for domestic banks by asking new banks to open 25 per cent of the branches in unbanked rural areas, he said.

Dipen Shah, senior vice-president (private client group research) at Kotak Securities, said: “It is a step in the right direction. It will help non-banking fincnce companies to become cost effective as they will be able to attract deposits at lower rates through current account and savings account deposits.”

Shah said it would also be a challenge to adhere to Reserve Bank of India norms of opening 25 per cent of their branches in unbanked areas.

Also due to certain eligibility norms, gains were capped in case of companies that have more than 10 per cent of their revenue from broking and real estate operations.

Reserve Bank of India’s draft guidelines said companies whose revenue from real estate and broking businesses are more than 10 per cent would not be eligible for new bank licences.

“Many of the aspiring candidates such as Religare, India Infoline, Indiabulls have been ruled out by RBI norms, in terms of eligibility requirements. RBI has made it very clear that a company needs to have deep pockets with a minimum capital requirement of Rs 500 crore,” Parmar said.

There are other eligibility conditions, which will be a challenge for the new players to follow.

“It’s going to be a challenge for these candidates to adhere to the capital adequacy ratio of 12 per cent for a minimum of three years, comply with priority sector lending target, and have 25 per cent of branches in unbanked rural areas,” Parmar said.