Mumbai: The Reserve Bank by month-end will invite applications for setting up small finance and payment banks, which will cater to low-income households and small businesses, after putting in place final norms in this regard. These banks are expected to bring in a large chunk of the public, especially in rural areas and other places with low penetration, into the formal banking system.
"We visualise mobile companies, companies with large rural presence, may be shops, may be kiosks, as well as possibly the post offices seeking payment bank licences," RBI Governor Raghuram Rajan said. "In the weeks to come, we would put out the final guidelines on payment banks. The guidelines are currently with the government for comments. I am hopeful that by the end of the month we will call applications for both small finance and payment banks," he said at a micro finance conclave, organised by the Nabard here.
Deepening the financial inclusion was one of the five items of agenda Rajan had set for himself after he took over last year. The central bank had earlier awarded universal banking licences to infra lender IDFC and micro lender Bandhan. The two new licences were issued after a gap of 12 years. One of the suggestions from the industry on the draft guidelines on small banks, Rajan said, is allowing all-India small finance banks instead local area ones.
But, the governor said, if at all the proposal was accepted, they will be allowed to take only deposits and extend loans predominantly to small entities. Stating that the small bank licence would offer avenue for successful micro-finance institutions to migrate to banking licence without it affecting their core business of working with small and the excluded, Rajan said a decision on this has to come from the government.
Small finance banks would provide a whole suite of basic banking products such as deposits and supply of credit, but in a limited area of operations. Payment banks would offer a limited range of products such as demand deposits and remittances. They would have a widespread network of access points particularly in remote areas, either through their own branch network or through business correspondents or through networks provided by others.
