NBFCs and old private sector banks: are they made for each other?

The Bank Nifty is making high records nowadays, but some irrelevance appears to be the fate for an important lending segment: Old private sector banks. Unless Mint Road obliges .
 
A liberal regulatory regime could, however, be made with a new lease of life into these lenders if capital-rich NBFCs are allowed to merge with these institutions and many of the business which traces their origins landscape pre-dating India’s Independence. 
 
Old private sector banks and other smaller banks have low-cost liabilities and still attractive and bets for large NBFCs. IDFC Bank’s merger with Capital First has shown the way with the other banks.Only  If RBI approves Lakshmi Vilas Bank’s merger with Indiabulls Housing Finance, it could make a good example or target. 
 
Previously, old private sector banks in India merged with other banks. Many of the banks have merged, For example, Lord Krishna Bank merged with Centurion Bank of Punjab in 2007, Sangli Bank merged with ICICI Bank in 2006, and Centurion Bank of Punjab joined with HDFC in 2008. More recently, in 2016, ING Vysya Bank was merged with Kotak Mahindra Bank. 
 
NBFCs can never sustain a wholesale balance sheet and compete for retail credit creation in the bank said by  Diwanji. “If NBFCs try to raise capital, their cost of funds goes up so high that they are not able to grow. And Another option is to migrate to deposits its funds. Only A bank license will give them the ability to take deposits. NBFCs like Capital First migrated toward deposit base by merging with a bank. Other small finance companies or NBFCs that converted into small finance banks also migrated toward a deposit base.
  
LAST-MILE CONNECTIVITY 
NBFCs have been credited with reaching out to last-mile customers. Banks can gain from NBFCs’ understanding of customers in rural markets also. 
Allowing mergers between robust NBFCs and old private banks will solve the RBI’s problem of dealing with weak and banks. 
 
“Instead of forcing a big bank to take over a weak bank, RBI should allow NBFCs to merge with banks because the former will cherish it more as they now get access to deposits and the credit creation. 
 
NBFCs with a large balance sheet would want concessions in maintaining statutory liquidity ratio and cash reserve ratio