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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, S.S. Mundra, Deputy Governor, has said.
As many as 72 players have expressed an interest to set up small finance banks and made applications with the central bank for this purpose.
Small finance banks would be allowed to undertake both lending and deposit taking to un-served and under-served sections. However, limits would be placed on the loan size and the quantum of deposits that could be accepted by such banks.
“We are going to announce the names (successful applicants) in 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 also 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.
Earlier, Mundra said in his address that RBI would soon allow banks to undertake ‘credit enhancement’ of the debt issued by corporates.
A credit enhancement 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 Ltd (IIFCL), which is a wholly-owned Government company.
Credit enhancement is in the form of a first-loss partial guarantee from IIFCL. A first-loss guarantee provides investors with recourse to the guarantor for a certain pre-defined percentage of debt service obligations on the instrument.
The RBI has allowed payments banks and small finance banks to come up in the country to deepen financial inclusion. Last month, RBI had granted in-principle approval to 11 entities to set up payments banks in the country.
“Payments banks will complement universal banks. They are not competing with them. Universal banks have an edge over payments banks with wider product and service,” said Rajan at an event here.
A payment bank can accept deposits of up to ₹1 lakh. It could offer current and savings account deposits. It can also issue debit cards and offer Internet banking. However, it will not be allowed to lend or issue credit cards.
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