Reserve Bank gets 41 applications for payments banks, 72 for small banks

The Reserve Bank of India (RBI) has received at least 113 applications for setting up small and payments banks, it said on Tuesday.

The deadline to submit applications for setting up niche banks was Monday. It had been extended from the earlier deadline of January 16.

In its bi-monthly monetary policy statement, the RBI said: "seventy two applications for small finance banks and 41 applications for payments banks were received up to the deadline for submission yesterday. This number excludes applications that might have been received at other venues."

These applications are now going to be scrutinised and evaluated by the External Advisory Committee (EAC).

The EAC for small banks will be chaired by Usha Thorat, former deputy governor, RBI. Nachiket Mor, director, Central Board, RBI, will chair the committee for payments banks.

Several corporate giants such as Reliance Industries, Bharti Airtel, Aditya Birla Group, Future Group, Vodafone and others are in the race to get a licence for payments banks. Lenders such as ICICI Bank, Kotak Mahindra Bank and Axis Bank have expressed an interest to partner with applicants for payments banks.

Payments banks can accept deposits of up to Rs 1 lakh, offer current and savings account deposits, issue debit cards and provide internet banking. They are not allowed to lend or issue credit cards. Other players that have applied for payments banks include Paytm, Oxigen, Fino PayTech and ItzCash.

Small finance banks - like commercial lenders - accept deposits from and lend to unserved and under-served sections.

The maximum loan size and investment limit exposure to single and group obligors cannot be more than 10 per cent and 15 per cent of its capital funds, respectively. Also, at least 50 per cent of their loan portfolio has to include loans and advances of up to Rs 25 lakh.

After the draft guidelines for small finance banks came out, the enthusiasm for it was limited. However, in the final guidelines, RBI had removed the restrictions on the area of operations, thus leading to a greater interest.

"The interest for small banks went up after RBI removed the clause for geographical restriction. Not many players wanted to apply at that time if the operations were going to be limited only to a certain cluster," said Shinjini Kumar, leader, banking and capital markets, PricewaterhouseCoopers India.

RBI had also said small banks can convert themselves into universal banks, though the transition would not be automatic and will depend on the regulator's approval.

SKS Microfinance, DHFL, Capital Area Local Bank, Coastal Local Area Bank, ESAF Microfinance and others have applied to open small banks. Several other microfinance companies, some non-banking financial companies, local area banks and individuals have also applied for small finance bank licence.