Chola DBS Converts To Non-Deposit Taking NBFC
The Financial Express

Conversion could be linked with recent RBI draft guidelines

November 6 2006, Mumbai: Moves are already afoot by some non-banking finance companies (NBFCs) to convert themelves from deposit-taking to non-deposit-taking ones, even as the Reserve Bank of India (RBI) announced strict draft guidelines for the sector on Friday, which included restrictions on stakeholdings in deposit-taking NBFCs.

Cholamandalam DBS Finance Ltd, a south-based deposit-taking NBFC, has already decided to convert its status from a deposit-taking NBFC to non-deposit-taking one. The board of the Cholamandalam DBS has already approved this conversion at its recently held board meeting, said a source close to the development.

The conversion could be linked to the recent draft guidelines issued by Reserve bank where the regulator has put a cap on banks holding stakes in deposit-taking NBFCs to 10 per cent.

While commenting on this development, an official of the Development Bank of Singapore (DBS) official told FE , ''The decision was taken in the board meeting, which was held on October 19, which is prior to the announcement of the guidelines. However, we cannot disclose whether a request had been sent to the regulator for the conversion."
Further, while responding to the benefits, the official stated that the guidelines were still at a draft level and had to be discussed further. The Murugappa Group and DBS each hold 37.48 per cent of the equity in the NBFC, while the remaining 25.04 per cent is with the public.

On January 27 DBS entered into a joint venture with the Murugappa group to enter into the retail finance space. DBS acquired 20 per cent of the NBFC stake from the public through an open offer and the remaining 17.48 per cent from Tube Investments of India Ltd through a share purchase agreement.

Meanwhile Neeraj Swaroop, CEO, Standard Charted Bank, India has commented that the RBI's draft NBFC guidelines is not unexpected as it reflects what the central bank has been voicing over the last few months.

''We are fully supportive of the Reserve Bank of India's initiatives in this regard and see it as yet another step in making guidelines transparent and level-playing. India is one of our key focus markets, and we are happy to operate in this country within the current regulatory framework," he said.