Mahindra Finance Won’t Seek Banking License

Mahindra & Mahindra Ltd. Financial Services Ltd., the SUV maker's lending arm, has decided not to apply for a banking license from the Reserve Bank of India.

India decided in 2010 to open the bank sector to non-bank lenders. The central bank issued regulations earlier this year, and applications are due by July 1. Analysts had expected Mahindra Finance to seek a license so it could gain access to a deeper pool of capital for making auto loans.

But the company says the Reserve Bank's rules for companies making the transition to bank status are too onerous for large lenders. A new bank must immediately attract deposits proportionate to its asset base and hold them as cash, which Mahindra notes would be difficult for it to do.