The countdown to the first-ever niche banking licence award process has began. The external advisory committee headed by Nachiket Mor, set up to vet the applications for a payments bank licence, has given its report to the Reserve Bank of India (RBI). Sources indicated the four-member panel was liberal in its recommendation. RBI has not said how many licences will be awarded, beyond saying the approach would be cautious. An external panel under former RBI Deputy Governor Usha Thorat was also set up to screen applications for a small finance bank licence. That panel is yet to give its finding, with sources saying it would come soon. RBI will first grant the payment bank licences and then the small finance bank ones. In all, 41 applications came for a payments bank licence. And, 72 entities applied for a small finance bank. Once the Mor recommendations are processed, the list will be discussed in RBI’s Committee of Central Board (CCB). The CCB comprises board members of RBI, including deputy governors; executive directors are also invited. A number of corporate houses, including Mukesh Ambani’s Reliance Industries, the Bharti Group, State Bank of India and IDFC, and a host of payment wallet firms had applied for a payments bank licence. Some lenders have formed joint ventures for this. In November last year, RBI issued final guidelines for both types of proposed banks, the first time applications were invited for differentiated bank licences. Till now, RBI has issued only a universal bank licence. A payments bank will not be allowed to lend and will invest 75 per cent of funds in government securities.
Its main focus is to offer remittance services and simple financial products. The minimum capital requirement is set at Rs 100 crore. Such entities will be allowed to accept savings deposits up to Rs 1 lakh a customer. Small finance Banks will be similar to the existing commercial lenders. They’ll undertake the basic banking activity of accepting deposits, and will lending mainly to the unserved and underserved sections. The maximum loan size and investment limit exposure to single and group obligators cannot be more than 10 per cent and 15 per cent of capital funds, respectively. Apart from this, at least 50 per cent of the loan portfolio has to include loans and advances of up to Rs 25 lakh. RBI had also said small banks could later convert into universal banks, though the transition would not be automatic, dependent on regulator approval.