Mumbai, August 29
The Reserve Bank of India on Monday released its much-awaited draft guidelines for new banking licences, with the basic message that it is looking for companies with diversified ownership and less exposure to risky business such as broking and real estate.

The guidelines had been under discussion for more than a year. These allow business houses with successful track record and a minimum capital of Rs 500 crore to set up commercial banks. The draft, on which the RBI has invited comments from stakeholders till October 30, also spelt out the framework for converting non-banking financial companies into banks.

The draft, which follows a discussion paper on the issue by the central bank in last August, does not specify the number of licences to be issued as part of the new policy.

In 2001, RBI had issued two banking licences. In 1993, it had allowed 10 entities to float commercial banks.

The RBI has suggested a 49% limit on foreign shareholding and a two-year deadline to list shares for new banks in its draft rules.

Activities such as real-estate and broking, "apart from being inherently riskier, represent a business model and business culture which are quiet misaligned with a banking model," said the central bank, which has historically been cautious about opening up the sector to more players due its apprehensions on controlling bad loans.

These conditions may make it difficult for keen aspirants such as Religare Enterprises Ltd., Indiabulls Financial Services Ltd. and Reliance Capital Ltd. to qualify, analysts said.

Companies like Larsen & Toubro Ltd., Mahindra & Mahindra Financial Services Ltd., with a reasonably diversified shareholding, have a fair chance to gain banking licenses.

"Diversified ownership is the key criterion," said an analyst. "Most other conditions could be easily met by most large corporates."

The last time India issued a banking license was in 2004, to Yes Bank Ltd.

According to the draft, new banks' total exposure to their founding groups should be limited to 20%, with the exposure to a single entity capped at 10%.

It said NBFCs could be considered to either set up banks or convert themselves into banks. The final rules will be released after making amendments to the Banking Regulation Act. It also said licenses will be issued on a very "selective basis."— Agencies

Welcoming the Reserve Bank's draft guidelines on granting new bank linceces, corporates and analysts today said the norms would pave the way for entry of business houses into the banking space. "We welcome the draft banking guidelines. Clearly, based on eligibility criteria, Aditya Birla Nuvo, which enjoys a significant presence across several key financial services businesses, would fit into the criteria," Aditya Birla Nuvo Chief Financial Officer Sushil Agarwal said. Analysts said the draft incorporates a lot from the consultative process held after the the discussion paper floated by the RBI in August, 2010. "Overall, this is a good set of guidelines. They give a clear set of directions about the entry of corporates which is welcome," consultancy firm Ernst and Young's Director Viren Mehta said.— Agencies

New Delhi, August 29
Reliance Broadcast Network (RBNL) today said it is in discussion with private equity players to raise up to Rs 400 crore to fund its radio and television network expansion.

"We are looking at raising about Rs 300-400 crore. We are in discussions with private equity players and strategic investors," RBNL Chief Financial Officer Asheesh Chatterjee told PTI.

He added that the company expects to finalise the deal before the end of the ongoing fiscal. The company has appointed Yes Bank as one its advisers for the transaction, he said, adding the transaction would not lead to dilution of promoter stake.

For ended June 30, 2011, the promoters have 63.87 per cent equity in the company. He said the fund would be used for financing expansion of its business, mainly the radio business and also to partly repay debt which is at Rs 120 crore.— PTI

Mumbai, August 29
Indian full service airlines, buffeted by high fuel costs and intense competition, face new headwinds on their lucrative international routes as budget carriers launch services with rock-bottom fares.

With low-cost carriers launching routes using narrow-body aircraft to overseas destinations within five hours flying time of India, full-service players are being forced to respond with similar no-frills offerings on popular and profitable routes.

Budget airline IndiGo, which in June firmed up a $16.2 billion order for 180 single-aisle Airbus aircraft, has received government approval to fly to Singapore, Bangkok, Dubai and Muscat, and is luring passengers with round-trip fares as low as 9,999 rupees ($220).

By comparison, full service carriers charge between Rs 17,000 and Rs 22,000 for economy class Mumbai-Singapore routes booked a month in advance.

"The entry of IndiGo will help in growing the market. Low cost carriers are creating a new market with a new breed of customers who did not fly international earlier," said Kapil Kaul, chief executive for the Indian subcontinent and Middle East at the Centre for Asia Pacific Aviation (CAPA).

Under Indian aviation laws, an airline needs to locally operate for five years before being assigned overseas routes.

Low-cost operator SpiceJet, with just six international flights now among its 200 daily flights, plans to expand its overseas network and has applied for several international routes, CEO Neil Mills said.

"Low cost carriers are much better poised to take advantage of the growth, because India is a very price-sensitive market," Mills told Reuters.

Full-service carriers Jet, Air India and Kingfisher Airlines already compete on regional international flights with foreign full-service rivals such as Emirates, Thai Airways, Singapore Airlines and Cathay Pacific.

Low-cost carriers already flying international routes to India include Malaysia's AirAsia as well as flydubai and Air Arabia, both based in the United Arab Emirates. Singapore Airlines also plans a low-cost carrier.

AirAsia is expected to use much of its new fleet to link Southeast Asia to India and China.

Asia is expected to account for more than half of global airline profits this year, according to the International Air Transport Association.

Jet Airways, India's biggest carrier by market share, said it plans to introduce more low fare flights on shorter international routes to take on emerging rivals such as IndiGo and SpiceJet.

"Globally the push towards low-cost is real," said Sudheer Raghavan, chief commercial officer at Jet. "We will use the narrow bodied aircraft for low fare routes," Raghavan said, referring to international routes under five hours. Lucrative international routes have helped Indian carriers offset often loss-making domestic routes.— Reuters

New Delhi, August 29
Telecom Minister Kapil Sibal today asked private telecom operators to replicate the success story of telecom revolution -- witnessed in urban India-- in rural areas as well.

"The fact that rural teledensity stands at 36% against the urban teledensity of 163% shows that the telecom revolution has not reached the people who really need to be benefited.

"It should be our endeavour to ensure that this revolution is completed in an equitable manner," Sibal said while addressing the curtain raiser conference of 'India Telecom 2011: m-Powering India'.

In the same event, Tata Teleservices and IIT Bombay Center for Excellence in Telecom launched Mobile Social Network Platform, a unique and powerful social recommendation and networking platform, to develop personalised applications and send targeted promotions to users within network.

Sibal has cautioned private telecom operators against selective use of the proposed National Optical Fibre Network (NOFN) for pushing their own products and emphasised the need for using the network for good.— PTI

New Delhi, August 29
Railway travel, capitation fees or donations in educational institutes and non-compete services are among the many new services that may come under the proposed Goods and Services Tax (GST), says a concept paper on the issue.

It says some of the notable services that could come under the GST are services provided by government for a fee or user-charge, transportation of passengers by railways, re government for fee or user-charge, transportation of renting of vacant land for commercial use excluding agriculture use, capitation fees or donation in education institutes, non-compete services, some additional services relating to construction and real estate.

The negative list contains 27 services including funeral, burial and mortuary agencies, interest paid on deposits by bank, services provided by independent journalists, dividend on investments, and transport of passenger in public transport are excluded from paying tax.

The government has invited feedback, views and suggestions by September 30 on the Concept Paper with inputs from industry bodies like CII, FICCI, ASSOCHAM and PHDCI.— PTI

Chandigarh, August 29
The bicycle industry has demanded imposition of anti-dumping duty on imports of bicycle items from China, saying growing shipments from that country has hit the local production.

"We have urged the Union Ministry of Commerce to take effective steps like imposing anti-dumping duty on import of bicycle and parts from China as it has hit the local bicycle manufacturing hard," Federation of Punjab Small Industries Associations, President, Badish K Jindal said today.

Jindal informed that after showing data relating to export and import of bicycles, the association has also got assurance from MSME Secretary to set up a committee in Punjab for preparing a case of imposition of anti-dumping duty on bicycle parts.

Pointing out derailing of bicycle exports and sudden shoot up in import, Jindal said export of bicycle and its parts have shrunk to Rs 650 crore in 2010-11 against shipments of Rs 1,200 crore in 2008-09.

Similarly, import of bicycle from China has shot up from Rs 300 crore in 2008-09 to Rs 1,600 crore till last fiscal, severely impacting the domestic production of bicycle items.

"As per sensitive items data of May 2011 of Ministry of Commerce, the import of bicycle parts has increased considerably," he said.

According to data, bicycle items, including wheels, import gone up to 1572 per cent, chain to 81.5 per cent, hub, 569 per cent among major items sourced from China.

He added that Europe has already levied 48.5 per cent import duty on bicycles and parts from China while Canada has also imposed duty on particular items from China.

As a result of unchecked import of bicycle parts, manufacturers of kids bikes, spoke, steel balls, hub cone, free wheel, air pump etc have suffered maximum damage to their business, he said. — PTI