Fin services secy calls for on-tap licensing for small banks

Financial Services Secretary Anjuly Chib Duggal today hinted at more "loosening of the window" for starting small finance and payments banks.

Describing the domestic banking system as "a very happening sector", Duggal said "since universal bank licences are on-tap now, we could look at further loosening of the window for starting small finance banks and payments banks".

This is expected to further deepen the ongoing financial inclusion drive so that more and more people could be brought under the formal banking system.

Duggal, however, quickly added that this is something that falls under the remit of the Reserve Bank.

"It is actually the mandate of RBI. But clearly, the time has come to have on-tap licensing for differentiated banks as well," Duggal said.
 

"There is a massive financial inclusion drive. We are not only looking at outreach programme of banks, but also pulling in a number of existing institutions," she added while addressing the AGM of the national bankers' lobby IBA here, along with Finance Minister Arun Jaitley.

In 2015, RBI had issued in-principle approval to 11 entities to launch payments banks and 10 for small finance banks.

Though none of these licence holders started operations as yet, entities like RIL-SBI, Vodafone and Airtel, among others, are waiting to kick off their operations.

She also said a search for CEO of the proposed postal bank is on.

"I think by the end of next month, we may be very close to having a CEO, who will looking at a number of issues of the postal bank," she said.

Describing regional rural banks as the "original small finance banks", she said that given their huge outreach, these can be used as outposts for financial inclusion.

Calling for speedier resolution of stressed assets that have crossed 12 per cent as of the June quarter, Duggal linked ability to cope with the changes with resolving assets, particularly in consortium arrangements.

"The JLF (joint lenders' forum) mechanism has somehow become a cold feet mechanism as it doesn't seem to be working the way it ought to be. Unless we resolve these assets, we are not going to be competitive as we go along," she said, adding that the longer the delay in finding a resolution, the bigger the risk becomes.