RBI likely to issue licence for small, payments banks by August

Central Bank has received 72 applications for Small Finance Banks and 41 for Payments Banks

The wait for differentiated banking licence is expected to get over soon. The Reserve Bank of India is likely to issue the licence for either Small or Payments Banks by August.

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

The Reserve Bank of India has received 72 applications for Small Finance Banks and 41 for Payments Banks. The list of applicants for differentiated banking licence is full of marquee names with players’ like-NSDL, Tech Mahindra, Dilip Shanghvi featuring in the list. Other big corporate such as Reliance Industries, Airtel, Aditya Birla Group, Videocon Industries amongst others have also applied. Department of Posts has also made an application for a Payment Bank licence.

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.Some other players that have applied for Payment Bank licence includes-Cholamandalam Distribution Services, NSE Strategic Investment Corporation, Vakrangee Limited, Citrus Payment Solutions, ItzCash, One MobiKwik Systems  and Oxigen.

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% and 15% of its capital funds, respectively. Apart from this, at least 50% of their loan portfolio has to include loans and advances of up to Rs 25 lakh, as per RBI regulations.

Players such as--Capital Local Area Bank, Coastal Local Area Bank, SKS Microfinance , Jagaran Microfin, Dewan Housing , ESAF Microfinance and Investments, Lulu Forex among others have made an application for Small Finance Banks.