RBI May Issue Small Bank Licences Next Month: Rajan
Mumbai: After granting approval to 11 entities for payments banks, Reserve Bank of India Governor Raghuram Rajan on Thursday said it will announce small finance bank licences next month and allayed concerns that these new entities can pose any threat to existing banks.
RBI Governor Raghuram Rajan said that new payments banks would not pose any competitive threat to the existing banks and these new entities would rather serve as 'feeder' for the universal banks.
The RBI had received 72 applications for small finance bank licences and 41 applications for payment bank licences. Out of these, RBI on Wednesday granted 'in principle' approval for payments bank to 11 entities, including Reliance Industries, Aditya Birla Nuvo, Tech Mahindra, Airtel and Vodafone.
Dr Rajan said that RBI would announce small finance bank licences next month.
The small finance banks can provide basic banking services like accepting deposits and lending to the unbanked sections such as small farmers, micro business enterprises, micro and small industries.
The payments banks would be allowed to provide payments and remittance services, but cannot issue credit cards or accept deposits beyond Rs 1 lakh. They can issue ATM and debit cards and also distribute mutual fund and insurance products.
Rajan said introduction of Payments Banks will revolutionise banking, make it very exciting for customers and existing lenders will have to improve service to retain depositors.
"I've no doubt banking will become very competitive and universal banks have to provide full service to retain customers," Dr Rajan said during a chat with SBI Chairman Arundhati Bhattacharya at the conference organised by the country's largest lender
The introduction of payments banks will make banking "exciting" for the customers, Dr Rajan said.
Ms Bhattacharya had asked whether payments banks could lead to a "worry" and eat into the low-cost deposit base for banks as the new banks have the option to accept deposits.
Dr Rajan said there is no threat to the banking system and the payment banks will serve as a feeder for the existing banks. The bank branch can become a centre of activity, helping with cash handling or do some completely new work.
"There is a lot of scope for everyone, not everybody will succeed but this is a revolution which can happen," he said.
