IDFC Ltd said on Friday the Reserve Bank of India had granted banking licence to the financial company, making it the second lender to enter the banking sector after more than a decade.
Indian microfinance company Bandhan Financial Services and Mumbai-based IDFC were the only two companies to be granted preliminary bank permits last year. Yes Bank was the last bank to be set up, in 2004.
Bandhan in June said that it would launch banking operations in August.
Millions of people in India do not have access to formal banking services.
The move to grant new permits marked the start of a cautious experiment to create more competition in a sector dominated by state lenders, many of which are reluctant to expand into rural areas or towns where banking penetration is low.