Norms for floating small finance, payments banks ‘may be eased’

To further the cause of financial inclusion, there could be further loosening of rules for starting small finance banks and payments banks, said Anjuly Chib Duggal, Secretary, Department of Financial Services.

Referring to banking as a ‘happening sector’, Duggal observed that with licensing of universal banks now being put on tap, there could also be some liberalisation of norms for floating small finance and payments banks.

She, however, emphasised that liberalisation of bank licensing norms falls under the Reserve Bank of India’s purview.

Last year, the central bank had given ‘in-principle’ approval to 10 entities, including Au Financiers, Capital Local Area Bank, Equitas Holdings, Suryoday Micro Finance, and Ujjivan Financial Services, to start small finance banks and 11 entities, including Aditya Birla Nuvo, Airtel M Commerce Services, Department of Posts, and Reliance Industries, to start payments banks. Speaking at the 69th annual meeting of the Indian Banks’ Association, the Secretary said: “There is a massive financial inclusion effort afoot. We are looking at not only the outreach from the banks’ but also at pulling in a number of existing institutions.”

She felt that institutional relationships in the banking space will get realigned with the advent of small finance banks, payments banks, and financial technology companies.

Duggal said t he search for the CEO of postal bank, which will be floated by the Department of Posts, has begun. The search is being conducted by the Banks Board Bureau.

“I think by the end of next month we may be very close to having a CEO, who will be looking at a number of issues to be taken up by the post office bank.

“In terms of sheer impact and footprint on the ground, we are really going to see something very widespread out here (once the post office bank starts its operations),” she said. The Secretary underscored the fact that the Postal Department has 1.55 lakh branches and about 2.60 lakh feet-on-the-street.

With stressed assets in the banking system touching 12 per cent as at June-end 2016, Duggal said: “Our ability to cope with the changes is very closely linked to our ability to resolve assets, particularly in consortium arrangements.”

“We have the joint lenders’ forum mechanism. It doesn’t seem to be working the way it ought to.

“And unless we address ourselves to resolve these assets, we are not going to be competitive as we go along…we need some efficient, effective activity here,” she said

COMMENT NOW