'On Tap' Licensing For Small Finance Banks Under Study, Says RBI

The Reserve Bank of India (RBI) on Thursday said it was considering 'on-tap' licensing facility for small finance banks and proposed to issue the draft guidelines by the end of August.

The 'on-tap' facility allows the RBI to accept applications and grant licence for banks throughout the year. The policy allows aspirants to apply for universal bank licence any time, subject to fulfilment of set conditions.

So far, the RBI has issued licences to 10 small finance banks. Of this, eight have been included in the Second Schedule of the RBI Act, 1934 and are now scheduled banks.

"A review of the performance of small finance banks reveals that they have achieved their priority sector targets and thus attained their mandate for furthering financial inclusion. Hence, there is a case for more players to be included to enhance access to banking facilities to small borrowers and to encourage competition," said the RBI's "Statement on developmental and regulatory policies", released after the monetary policy meeting.

The RBI also said it would need more time to review performance of payments banks before considering the 'on tap' licensing facility for them.

In its guidelines for licensing of payments banks and small finance banks in the private sector, dated November 27, 2014, the RBI had said the central bank would consider 'on tap' licensing for both small finance banks and payments banks after gaining experience in dealing with these banks.