Ex-Citi CEO Vikram Pandit, JM Financial join hands for banking foray in India

Pandit, 56, will acquire 50% stake in JM's non-banking financial company (NBFC) and buy 3% stake in the parent company, it said.[/caption]

Former Citigroup Chief Executive Vikram Pandit is buying a stake in financial services company JM Financial Ltd , JM Financial said in a statement on Thursday.

Pandit, 56, will acquire 50% stake in JM's non-banking financial company (NBFC) and buy 3% stake in the parent company, it said.

Pandit, who resigned from Citi last October, will also become non-executive chairman of JM Financial's banking arm if it succeeds in getting a banking license, the company said.

India is in the process of issuing new bank licences for the first time since 2004, and numerous companies are expected to apply.

In its board meeting on Thursday, JM Financial also decided to apply for a banking licence as per the Reserve Bank of India's guidelines.Since the RBI is said to be keen to grant one or two banking licences to banks helmed by professionals, Pandit's induction may help JM's chances.

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Pandit will have the right to buy shares in the proposed bank.

JM Financial said it would expand its lending and financing businesses by issuing $100 million in capital to funds raised and managed by a firm led by Pandit.

JM Financial, one of India's largest domestic financial firms, also said it would set up a fund jointly with Pandit's firm to buy distressed assets. The fund is targeting an initial capitalisation of $100 million.

Media reports said Pandit and Aiyar together would own little under 10 percent because Non-Resident Indian (NRI) are not allowed to have stake beyond 5 percent as per the RBI guidelines in a banking company.

Pandit said he had known JM Financial for more than two decades. "Given the opportunity, JM Financial can provide the banking and financial services that the country needs," he said in JM Financial's statement.

Pandit and his business partner, Hari Aiyer, will buy a 3 percent equity stake in the financial services company through an issue of warrants, the Indian company said. JM Financial has a market capitalisation of $279 million.

Morgan Stanley and Azim Premji, the chairman of Indian IT services exporter Wipro each owned roughly 3 percent of JM Financial as of the end of March.

Agencies