INDIAN STOCK MARKET

After shaking up the banking industry with the merger of Centurion Bank of Punjab last month, private sector HDFC Bank is planning to start a non-banking finance company (NBFC). Sources said the bank could get into investment banking through this NBFC, the license for which was received around September last year.

The NBFC has been tentatively called HDB, but there could be a change in the name for the launch, sources said.

Though HDFC Bank officials could not be reached, sources said the bank “will try to fill the gaps in its current business through this NBFC.”

“We will see that there are no gaps in our products. There will be a clear cut direction to this business (NBFC) vis-a-vis the bank. Obviously an NBFC has a lot of advantages over a bank, which can be tapped,” an official said.

Banking analysts said an entry into investment banking would be a logical extension for HDFC Bank, particularly after the acquisition of Centurion Bank of Punjab last month.

Ananda Bhoumik, senior director, banking at Fitch Ratings, said an investment banking arm will complete the picture for HDFC Bank. “It will be an additional product. They already have access to clients, which will be an added advantage. They already are big in equities and the M&A market will always be big,” he said.

Also, the NBFC would relieve the bank of some norms of the Reserve Bank of India.

“NBFC’s don’t have statutory requirements like the mandatory 25% investments in SLR securities or keeping aside 7.5% of deposits as cash reserve ratio or even borrowing daily through the call money market,” said an analyst with a foreign brokerage.