With financial inclusion in focus, the Reserve Bank of India (RBI) on Wednesday granted in-principle approval to 10 applicants to set up small finance banks. The move aims to bring the weaker sections of the society under formal banking.
Last month, the RBI granted approval to 11 entities, including Reliance Industries, Aditya Birla Nuvo, Airtel, Vodafone M-pesa and India Post among others, for launching payments banks. While small banks can perform all activities similar to commercial lenders, though on a restricted scale, payments banks cannot undertake lending operations.
Besides, IDFC and Bandhan have been given full-fledged banking licences.
The applicants selected for setting up small finance banks include Au Financiers Ltd, Capital Local Area Bank, Disha Microfin, Equitas Holdings, Ujjivan Financial Services, Utkarsh Micro Finance, ESAF Microfinance and Investments, Janalakshmi Financial Services, RGVN Microfinance and Suryoday Micro Finance.
The 'in-principle' approval will be valid for 18 months to enable applicants to comply with the requirements for such category of banks, as issued by the RBI on November 27, 2014. The RBI said it will use the learning from this round to appropriately revise guidelines and move to giving licences more regularly, 'on tap'.
In its statement, the central bank said that after it is satisfied with applicants' compliance, a licence would be granted for commencement of banking business. "Till a regular licence is issued, applicants cannot undertake any banking business," it said.
"We have started identifying Indian promoters," said Samit Ghosh, CEO, Ujjivan Financial.
"Our intention is to create a structure that the RBI has suggested under the universal bank category," said VS Radhakrishnan, CEO, Janalakshmi Financial.