Mohandas Pai, former Citibank executive Ramesh Ramanathan in race for licence to start a bank

 Mohandas Pai and former Citibank executive Ramesh Ramanathan will be part of the business groups throwing their hats in the ring for a licence to start a bank.


BANGALORE: Mohandas Pai and former Citibank executive Ramesh Ramanathan will be part of the business groups throwing their hats in the ring for a licence to start a bank. By doing so, the finance professionals will be joining what is expected to be a fierce competition for entry into a sector that has not admitted new players for nearly a decade.

Pai, a 
chartered accountant who was head of finance and human resources at Infosys, will be an important figure as the erstwhile founders of Syndicate Bank BSE 1.24 % attempt a comeback into a business they were forced to exit when banks were nationalised in 1969. For Ramanathan, who was MD and Europe head of corporate derivatives at Citibank in London, the opportunity to start a bank will supplement his ventures in affordable housing and microfinance. "It has been a long-held dream to start a bank," he said.

On Friday, the Reserve 
Bank of India unveiled guidelines based on which it will grant banking licences. Dozens are expected to vie for the right to start a bank, of which only about half-a-dozen may win licences. Pai, one of India's most influential finance professionals, will be backing the Manipal Education & Medical Group, where he heads the global education services arm.

"We are interested, and are discussing the possibilities, but can only share more details after 45 days," said Mohandas Pai, who is now with the Manipal Group. Ranjan Pai, the managing director and chief executive of the Manipal Education and Medical Group, said he was "very keen to go for it", referring to the interest in applying for a licence.

"India is largely unbanked and the sheer size and opportunity available makes this interesting for us." Ranjan Pai is the grandson of Syndicate Bank's founder TMA Pai. He is not related to Mohandas Pai. For the Pais, who run a diverse business that includes a deemed university in India, overseas campuses and a network of corporate hospitals, banking harks back to a family tradition.

In 1925, TMA Pai cofounded the Syndicate Bank in Udupi, in coastal Karnataka. The aspirants from Bangalore will compete against corporate heavyweights, including the 
Aditya Birla Group, Larsen BSE 1.51 % & Toubro and Mahindra & Mahindra, which have all indicated their interest in vying for a banking licence. Others likely to be in the fray are the Chennai-based Shriram Group, SKS Microfinance BSE 2.73 % and the Murugappa Group.

A real wild card could be NR Narayana Murthy, the 
Infosys BSE -1.13 % founder, if he decides to join the competition. Although people close to him said Murthy has expressed interest in the past in starting a bank, there have been no signs so far that he is making preparations in the light of the RBI guidelines. Murthy did not reply to an email seeking comments.

Ramanathan, who returned to India in 1998 and runs urban microfinance firm Janalakshmi, said the fact that RBI has made financial inclusion the core of the guidelines will be helpful to his bid. Moreover, new banks are expected to come in with the latest technology, giving them an edge there as they compete against established players.

The Reserve Bank has said a new bank must have 25% of its branches in unbanked rural centres, meaning towns and villages with population less than 10,000. Ramanathan, an alumnus of BITS-Pilani and 
Yale University, said Janalakshmi has received around Rs 200 crore in risk capital investments and expects to raise additional money in the next few months to meet the capital adequacy norms of Rs 500 crore for a banking licence.