American financial services giant, Morgan Stanley has been granted a banking licence by the Reserve Bank of India. This grant would enable the company to offer lending to its clients, to whom it currently offers advisory services on corporate restructuring.
This would give Morgan Stanley an edge over its competitors like Bank of America Merrill Lynch, Goldman Sachs who do not own such licence. The company was already number one in advisory on mergers and acquisitions the last year.
The move is an exception from global banking giants which have abstained from entering retail activities in India, mainly because of cut-throat competition from SBI, ICICI Bank, HDFC Bank and others. P.J. Nayak, the man behind the success of Axis Bank is the chairman for Morgan Stanley India.
There could however be one glitch in the company's profitability. The RBI mandates foreign banks to offer at least 32% of its total lending to agricultural sector; the limit for domestic banks is 40%.
‘The bank has received in-principle approval", said a person who didn't wish to be disclosed. But in order for it to become a complete bank, it needs to include para-banking activities like private banking.
The new licence would enable the bank to provide banking services like treasury, foreign exchange, wealth management, and corporate banking.