Niche banking licences likely by August

The Reserve Bank of India (RBI) is likely to issue licences for small or payments banks by August.

“I hope to be able to announce a new set of bank licences, at least one set, by August-end,” RBI Governor Raghuram Rajan said in a post-policy conference on Tuesday.

RBI has received 72 applications for small finance banks and 41 for payments banks. The list of applicants for differentiated banking licences included NSDL, Tech Mahindra and Sun Pharma chief Dilip Shanghvi. Others such as Reliance Industries, Airtel, Aditya Birla Group and Videocon have also applied. The Department of Posts has applied for a payments bank licence.

Payments banks can accept deposits of up to Rs 1 lakh and offer current and savings account deposits. They can also issue debit cards and offer internet banking. But such banks cannot lend or issue credit cards. Among the applicants for such licences are Cholamandalam Distribution Services, NSE Strategic Investment Corporation, Vakrangee Ltd, Citrus Payment Solutions, ItzCash, One MobiKwik Systems and Oxigen.

Small finance banks, on the other hand, will be similar to existing commercial lenders. These can carry out basic banking activities such as accepting deposits and lending to the unserved and under-served sections. Their loan size and investment limit exposure to single and group obligors is capped at 10 per cent and 15 per cent of capital funds, respectively. Also, at least half their loan portfolio has to include loans and advances of up to Rs 25 lakh, according to RBI regulations.

Capital Local Area Bank, Coastal Local Area Bank, SKS Microfinance , Jagaran Microfin, Dewan Housing , ESAF Microfinance and Investments and Lulu Forex, among others, have applied for small finance bank licences.