Small finance bank licences likely next month: Raghuram Rajan

RBI had yesterday granted in-principle approval to eleven applicants for payments banks

Bs_logoImage
BS Reporter Mumbai
Last Updated : Aug 21 2015 | 1:18 AM IST
After granting in-principle approval to 11 applicants for payments banks, Reserve Bank of India (RBI) Governor Raghuram Rajan said licences for small finance banks would be announced next month.

Payments banks and small finance banks are coming up in the country to deepen financial inclusion. “Payments banks will complement universal banks. They are not competing with them. Universal bank have edge over the payments banks with wider product and service,” said Rajan at an event here.

RBI had received a total of 113 applications from players keen to set up niche banks like payments banks and small finance banks. There were 72 applications for small finance banks and 41 applications for payments banks. Payments banks would act as feeders, reducing the cost of access for customers, the RBI governor said.

Payments banks can accept deposits of up to Rs 1 lakh and can offer current and savings account deposits. They can also issue debit cards and offer internet banking. But they are not allowed to lend or issue credit cards.

On the other hand, small finance banks will be similar to the existing commercial lenders and will undertake basic banking activities of accepting deposits and lending to unserved and under-served sections.

However, the maximum loan size and investment limit exposure to single and group obligors cannot be more than 10 per cent and 15 per cent of its capital funds, respectively. Apart from this, at least 50 per cent of their loan portfolio has to include loans and advances of up to Rs 25 lakh, according to RBI regulations. After the draft guidelines for small finance banks had come out, the enthusiasm for it was limited.

However, in the final guidelines, RBI had removed the restrictions on geography for the area of operations, thus leading to greater interest by players for small banks. “Payments banks is a worry in savings bank space since they may offer higher rates to attract funds,” Rajan said.

You’ve reached your limit of 5 free articles this month.
Subscribe now for unlimited access.

Already subscribed? Log in

Subscribe to read the full story →
Subscribe to Business Standard digital and get complimentary access to The New York Times

Smart Quarterly

₹900

3 Months

₹300/Month

SAVE 25%

Smart Essential

₹2,700

1 Year

₹225/Month

SAVE 46%

Super Saver

₹3,900

2 Years

₹162/Month

Subscribe

Renews automatically, cancel anytime

Here’s what’s included in our digital subscription plans

Access to Exclusive Premium Stories

  • Over 30 subscriber-only stories daily, handpicked by our editors

Complimentary Access to The New York Times

  • News, Games, Cooking, Audio, Wirecutter & The Athletic

Business Standard Epaper

  • Digital replica of our daily newspaper — with options to read, save, and share

Curated Newsletters

  • Insights on markets, finance, politics, tech, and more delivered to your inbox

Market Analysis & Investment Insights

  • In-depth market analysis & insights with access to The Smart Investor

Archives

  • Repository of articles and publications dating back to 1997

Ad-free Reading

  • Uninterrupted reading experience with no advertisements

Seamless Access Across All Devices

  • Access Business Standard across devices — mobile, tablet, or PC, via web or app

More From This Section

First Published: Aug 21 2015 | 12:31 AM IST

1 out of 5 articles left

Subscribe for unlimited access
Subscribe Now