The Reserve Bank of India (RBI) plans to announce the final norms on small and payments banks next month, a move which could eventually widen the number of players in the Indian banking sector.
RBI deputy governor SS Mundra, while addressing students of Narsee Monjee Institute of Management in Mumbai, said: “Soon, in a month or so, the RBI will come out with the final guidelines on small and payments banks.”
The central bank had mooted the idea of small banks and payments banks to deepen the financial inclusion process and to get more people under the financial system. It had come out with draft guidelines on the issue and had invited comments by August 28. “We have received comments on the discussion paper, “ Mundra said.
Once finalised, these norms would widen the number of players and also make micro-lenders, telecom players, non-banking finance companies and public sector companies eligible to apply for licences once RBI invites applications for the same.
Mundra sought to dismiss concerns on profitability for such banks, saying they can earn from a variety of avenues such as charging for transactions and through investments in government bonds. Small banks would provide a whole suite of basic banking products such as deposits and supply of credit, but within a limited scope.
Payments banks would offer a limited range of products such as demand deposits and remittances. They would also have a widespread network of access points particularly in remote areas, either through their own branch network or through business correspondents or through networks provided by others.
Finance minister Arun Jaitley, in budget speech had said that differentiated banks such as payment banks have been contemplated to meet the needs of small businesses, unorganised sector, low income households, farmers and migrant work force.