New categories of differentiated banks under consideration

Updated - January 16, 2018 at 02:47 AM.

Will help enhance financial inclusion, infra financing


The possibility of creating new kinds of differentiated banks, such as custodian and wholesale financing banks, will be explored, according to Reserve Bank of India’s latest Report on Trend and Progress of Banking in India.

“In pursuance of the long-term vision of developing a sound, competitive, inclusive and customer-friendly banking sector, the Reserve Bank will continue with the on-going regulatory and supervisory reforms and also explore newer areas,” the report said.

A 2013 policy discussion paper on ‘Banking Structure in India – The Way Forward’ had recommended that there is a need for niche banking in India, and differentiated licensing could be a desirable step in this direction, particularly for infrastructure financing, wholesale banking and retail banking.

Referring to this discussion paper, the RBI, in its report observed that the process of continuous authorisation (on tap of universal banks in the private sector) will keep competitive pressure on existing banks and, with financial inclusion as an integral part of the proposed business plan of a given bank, this will also help in enhancing financial inclusion.

The central bank has already embarked in the direction of licensing differentiated banks by granting in-principle approvals for setting up payments banks to 11 applicants in August 2015. It also granted in-principle approvals to 10 applicants for setting up small finance banks (SFBs). Both these categories of banks are aimed at furthering financial inclusion.

So far, two entities — Capital Small Finance and Equitas Small Finance Bank — have commenced operations as small finance banks, while Airtel Payments Bank has begun operating as the first payments bank.

The report said the Business Correspondent (BC) model, which has been at the heart of its financial inclusion efforts, will be scaled up further to expand its outreach to remote rural areas through registry, certification and training of these entities.

Following the ‘Payment and Settlement Systems in India – Vision 2018,’ payment infrastructure will be stepped up to address the five Cs of coverage, convenience, confidence, convergence and cost, the RBI said. Further, to address customer services-related concerns in the non-banking segment, the RBI will also take up the issue of designing an appropriate ombudsman scheme for NBFCs.

Published on December 29, 2016 17:13