RBI to mull more niche bank permits

MUMBAI (Reuters) - The Reserve Bank of India (RBI) will explore licensing differentiated banks such as custodian banks and lenders focusing on wholesale and long-term financing, Governor Raghuram Rajan said on Tuesday.

"A paper in this regard will be put out for comments by September 2016," Rajan said in the central bank's bi-monthly monetary policy statement in which it cut its key interest rate by 25 basis points to a more than five-year low.

Asia's third-biggest economy mostly depends on banks to fund its projects in the absence of a vibrant bond market. Slow-moving infrastructure projects however contributed to the banking sector's mountain of bad and troubled loans.

The new differentiated-bank permits come after the RBI last year selected 21 companies to operate two categories of niche banks - payments banks and small finance banks - to improve financial inclusion in a country where many people lack access to formal banking services.

Some of the permit winners are expected to start operations later this year.

Rajan also told a news conference that the RBI will release within weeks guidelines for licensing of full-service banks. Two new full-service banks started operations last year following India's first bank licensing round in a decade.

(Reporting by Devidutta Tripathy; Editing by Douglas Busvine and Simon Cameron-Moore)