Need more competition

Small finance banks have a clear path

The Reserve Bank of India last week issued rules outlining the glide path for existing “small finance banks”, or SFBs, that wish to transition to regular “universal” banks. While it is unclear if any of the current SFBs will take advantage of the process immediately, it is welcome that a clear set of policies has been introduced for what has been a long-stated goal. SFBs that transition will gain certain advantages — for example, they will then have lower capital requirements and can reduce their level of priority-sector lending. This will bring down their capital intensity and allow them to