IT upbeat on banking as Tata, Birla, Reliance in fray for new license

Indian IT sector is set to tap the banking segment in a big way as the Aditya Birla Group, Tata Sons, and Anil Ambani’s Reliance Group are in the fray for banking license from RBI.

IT industry is upbeat that these major business groups — after getting the relevant license — will roll out banking branches in 18 months.

IT spend by Indian banking and securities companies will be Rs 422 billion in 2013, up more than 13 percent over Rs 373 billion in 2012.

Market research firm Gartner’s forecast for 2013 includes spending by financial institutions on internal IT (largely personnel), hardware, software, external IT services and telecommunications.

IT services is the largest overall spending category at Rs 132 billion in 2013, Gartner said in January 2013.

Gartner’s forecast reflects RBI’s plans to increase the penetration of banks across the country and opening up the market to new entrants.

Vittorio D’Orazio, research director at Gartner, said recently: “In these cases, the front office technologies for the branch will be very attractive. However, to increase their penetration in India, banks will follow the leverage your customer device trend – or LYCD.”

This will evolve the relationship between the bank and its customers over the mobile channel without remarkably increasing IT costs. “In fact, we see the penetration rates of the smart phone devices in the triple digits range which is by far greater than any branch expansion rate,” D’Orazio added.

Apart from major business groups, companies such as Suryamani Finance-group company of Pawan Ruia of Dunlop, L&T Finance, Venugopal Dhoot’s Value Industries, Bajaj Finserv, India Post, IFCI, Tourism Finance Corporation of India and LIC Housing Finance, Edelweiss, IDFC, India Infoline, Indiabulls, Religare, Muthoot Finance, Magma Fincorp, SREI Infrastructure and Shriram Capital are also seeking banking license.

After getting in-principle approval from the central bank, promoters will have 18 months to complete requirement to launch operations. This includes bringing in capital of Rs 500 crore, transferring financial business under a non-operating holding company and having infrastructure in place.

picture source:

[email protected]