Universal bank licences: Here are key changes in licensing criterion

Two new sets of banks - small finance banks and payments banks - have also started operations under differentiated licensing norms

Exactly 10 years ago in April 2014, the Reserve Bank of India (RBI) awarded universal banking licences to two entities, namely Bandhan Financial Services and IDFC. No new universal banking licence has been given since. While four applications have been rejected, one is under consideration.

Key changes in licensing criterion

1. Licensing has been made on-tap. Entities can apply any time without waiting for the regulator to start the process

2. An internal working group of the RBI proposed allowing corporates in the banking sector. The recommendation is yet to be accepted

Small finance banks (SFBs)

In 2015, 10 licences were granted under the category. Two more have been given recently. Currently, there are 11 SFBs after Fincare SFB merged with AU SFB. The RBI has rejected applications of 7 entities to function as SFBs.

Payments banks (PBs)

In 2015, the RBI allowed 10 entities to function as PBs. But many surrendered the licences before starting operations. One PB’s application to become SFB is under consideration.

Status check

So far, the RBI has 13 applications to set up banks under the 'on tap' licensing facility for universal banks and SFBs. Of these, 11 applications have been rejected while two are under consideration.