Major reforms on the cards: RBI may allow telecom companies, NBFCs to set up banks
The Reserve Bank of India has proposed major reforms to boost financial inclusion, issuing draft guidelines allowing the likes of supermarkets and cellular phone companies to set up Payment Banks and permitting NBFCs and others to set up Small Banks whose licenses will be restricted to specified areas.
These two types of banks will have uniform capital requirement of Rs 100 crore, according to the draft norms. They will, however, have to follow distinctly different business models. The RBIproposals inaugurate an era of differentiated banking licenses, an idea championed by governor Raghuram Rajan. The first reform proposal will potentially enable the likes of Future RetailBSE -0.68 % and Idea CellularBSE -1.10 % to set up Payment Banks. A Payment Bank will be able to take deposits, but cannot lend. It has to invest all the funds in government securities.
A Small Bank on the other hand will be allowed to lend, but with restrictions on where they can operate. Further the lending should be directed at farmers and small enterprises and half of the loans must have a ticket size of less than Rs 25 lakh. Small Banks will also have to maintain reserve requirements like any other big bank, which could take some sheen off the proposal's attractiveness.
The Reserve Bank of India has proposed major reforms to boost financial inclusion, issuing draft guidelines allowing the likes of supermarkets and cellular phone companies to set up Payment Banks and permitting NBFCs and others to set up Small Banks whose licenses will be restricted to specified areas.
These two types of banks will have uniform capital requirement of Rs 100 crore, according to the draft norms. They will, however, have to follow distinctly different business models. The RBIproposals inaugurate an era of differentiated banking licenses, an idea championed by governor Raghuram Rajan. The first reform proposal will potentially enable the likes of Future RetailBSE -0.68 % and Idea CellularBSE -1.10 % to set up Payment Banks. A Payment Bank will be able to take deposits, but cannot lend. It has to invest all the funds in government securities.
A Small Bank on the other hand will be allowed to lend, but with restrictions on where they can operate. Further the lending should be directed at farmers and small enterprises and half of the loans must have a ticket size of less than Rs 25 lakh. Small Banks will also have to maintain reserve requirements like any other big bank, which could take some sheen off the proposal's attractiveness.
