Licences for small, payment banks likely in next two months

RBI Governor Raghuram Rajan

The Reserve Bank of India is planning to issue first set of licences for small and payment banks in the next two months. It will be a move aiming the promotion of financial inclusion. There were 41 and 72 applications payment bank and small finance bank licences respectively.

Besides gigantic corporates such as Birlas and Ambanis, the applicants also include Department of Post, Tech Mahindra, Videocon Group and stock exchange NSE. There are a total of 113 applicants, also comprising NRI businessman M A Yusuff Ali’s Lulu Group and microfinance company Ujjivan Financial Services Private.

Last week, after reviewing the monetary policy, RBI Governor Raghuram Rajan said, “I hope we would be able to announce a new set of bank licences, at least one set of bank licences by August-end. We are undertaking a review of all regulations governing markets to see where there is scope for further liberalisation once macroeconomic uncertainty diminishes.”

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

Payment and remittance services would be allowed to payment banks via various channels. However, lenders like these do not have the authority to issue credit cards or undertake lending activities.

The move to permit such differentiated banks came after the RBI found two entities — infra player IDFC and micro-lender Bandhan from among over two dozen applicants that were eligible for setting up commercial banks.

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