India: One Set of Niche Bank Licences by Aug-end - Rajan

Aug 2015
India, August, 05 2015 - RBI Governor Raghuram Rajan on Tuesday said he will announce at least one set of payment/small finance bank licences before the end of the month.

It had received as many 72 applications, including from Dewan Housing Finance Corp, IIFL Holdings, SKS Microfinance, Village Financial Services and UAE Exchange & Financial Services, for small finance banks. Besides, 41 applications for payments banks came from the likes of Aditya Birla Nuvo, Airtel M Commerce Services, Cholamandalam Distribution Services, Itz Cash Card, My Mobile Payments, Oxigen Services, Reliance Industries, Tech Mahindra, Videocon d2h and Vodafone m-pesa.

The Reserve Bank has received recommendations from the External Advisory Committees on Payment Banks chaired by Nachiket Mor and on Small Finance Banks chaired by Usha Thorat. "Now an internal committee of the Reserve Bank, composed of its Deputy Governors and the Governor, is going through each of these applications again. Finally, a set of recommendations will be presented to the Reserve Bank Board, which will decide the final list of successful applicants. I hope to announce at least one set of bank licences before the end of the month," Rajan said at the post-policy press meet at Mumbai.

The objective of licensing small banks is to promote financial inclusion by offering saving vehicles and credit to small business units and other unorganised sector entities.

Small finance banks will primarily undertake basic banking activities of acceptance of deposits and lending to unserved and under-served sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities.

Payment banks would be allowed payment and remittance services through various channels. However, such lenders cannot issue credit cards or undertake lending activities.

Differentiated banking entails going beyond the current universal banking framework and to serve specific purposes.

The idea was first suggested by Nachiket Mor committee in January 2014.

The move to allow such differentiated banks came after the RBI had found just two entities -- infra player IDFC and micro-lender Bandhan from among over two dozen applicants -- eligible for setting up commercial banks. Bandhan is expected to kick off its operations from August 23 while IDFC Bank will start operations from October.


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