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The Reserve Bank of India will, in the next few days, announce the names of successful applicants who are to be granted small finance bank licences, SS Mundra, RBI Deputy Governor, said.
The central bank has received as many as 72 applications for starting small finance banks, which will function on the lines of commercial banks, but would cater mainly to the unserved and underserved sections of society. There will also be limits on the loan size and the quantum of deposits that such banks can accept.
“We are going to announce the names (successful applicants) in the next few days,” Mundra told BusinessLine on the sidelines of a summit on ‘Financing India’s Growth: Way Forward’, organised by the PHD Chamber of Commerce and Industry (PHDCCI) here on Wednesday.
The RBI’s regulations stipulate that at least 50 per cent of the loan portfolio of small finance banks has to include loans and advances of up to ₹25 lakh.
Credit enhancementEarlier, Mundra said in his address that the RBI would soon allow banks to undertake ‘credit enhancement’ of the debt issued by corporates. This would raise the credit quality of debt issued by Indian companies and provide more comfort to bond market investors.
In India, a credit enhancement scheme has already been introduced by India Infrastructure Finance Company (IIFCL), a 100 per cent government-owned company.
Credit enhancement is in the form of first-loss partial guarantee from IIFCL. This provides investors with recourse to the guarantor for a certain predefined percentage of debt service obligations on the instrument.
It may be recalled that the RBI has allowed the setting up of payments banks and small finance banks to deepen financial inclusion. Last month, it granted in-principle approval to 11 entities to set up payments banks, which will complement, not compete with, universal banks.
Universal banks have an edge over payments banks as they provide a wider range of products and services.
A payments bank can accept deposits of up to ₹1 lakh through current and savings accounts. These banks can also issue debit cards and offer internet banking. However, they are not allowed to lend or issue credit cards.
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