RBI to consider more niche banking permits: Rajan

  • Reuters, Mumbai
  • Updated: Apr 05, 2016 15:24 IST
A file photo of Reserve Bank of India (RBI) governor, Raghuram Rajan. (AFP Photo)

The Reserve Bank of India (RBI) will explore licensing differentiated banks such as custodian banks and lenders focusing on wholesale and long-term financing, Governor Raghuram Rajan said on Tuesday.

“A paper in this regard will be put out for comments by September 2016,” Rajan said in the central bank’s bi-monthly monetary policy statement in which it cut its key interest rate by 25 basis points to a more than five-year low.

Asia’s third-biggest economy mostly depends on banks to fund its projects in the absence of a vibrant bond market. Slow-moving infrastructure projects however contributed to the banking sector’s mountain of bad and troubled loans.

The new differentiated-bank permits come after the RBI last year selected 21 companies to operate two categories of niche banks - payments banks and small finance banks - to improve financial inclusion in a country where many people lack access to formal banking services.

Some of the permit winners are expected to start operations later this year.

Rajan also told a news conference that the RBI will release within weeks guidelines for licensing of full-service banks. Two new full-service banks started operations last year following India’s first bank licensing round in a decade.

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