India 's Tata group is moving to launch a full-service bank should restrictions preventing industrial groups from owning substantial stakes in banks be relaxed.
Ishaat Hussain, finance director at Tata Sons, the group's holding company, said Tata already had businesses providing most of the services a bank would offer, including asset management, credit cards, stock and commodity broking, insurance, private equity, and consumer and commercial lending.
"The financial services area is a major thrust for us as a group and ideally we'd like to be a universal bank," he said.
Any move by the Tata group, India 's biggest private sector conglomerate with estimated annual sales of $70bn, or powerful rivals such as Reliance Industries, to set up banks would be keenly watched in the region. India restricts industrial conglomerates from owning more than 5 per cent of banks in a measure aimed at avoiding the kind of intra-group lending that helped inflame the 1997 Asian financial crisis.
India emerged largely unscathed from that crisis because its banking system was 80 per cent state-owned.
But the subsequent growth of private sector banks, foreign banks and new lending outfits known as non-bank finance companies led the Reserve Bank of India , the central bank, to tighten restrictions on bank ownership by local industrialists and overseas investors.
The government has also issued no new bank licences since early this decade.
Pressure is growing on the Reserve Bank of India , the central bank, to re-examine these restrictions next year, when it is expected to review rules governing the financial sector.
Companies such as the Tata group are manoeuvring themselves into position should the restrictions be eased, setting up businesses in almost every area of financial services barring collecting public deposits.
The Tata group has life and general insurance joint ventures with AIG. Tata's mutual fund arm, Tata Asset Management, has signed a deal to manage an India equities fund for New Star Asset Management of the UK.
Its non-bank finance company, Tata Capital, provides passenger and commercial vehicle loans, used car loans, personal loans, home loans and credit cards. It is also involved in retail and institutional broking, merchant banking, private equity, capital markets and rural finance. "It's a virtual bank," Mr Hussain said of Tata's financial division. "And hopefully in 2009, if the rules change, that will be our play in the banking sector."
Challenged on whether the rules would be eased even in 2009, he said the government was facing increasing pressure, particularly from US financial groups, which like other foreign institutions presently cannot acquire domestic banks and are subject to tight restrictions on the number of new branches they can open each year.
"If you'd asked me that question a year ago, I'd have said not a hope in hell. I wouldn't say that now," Mr Hussain said.
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