Small Finance Bank Licenses Next Month: Raghuram Rajan, RBI governor

August 23, 2015: RBI Governor Raghuram Rajan has announced that he will unveil the list of small banking licenses next month. Reserve Bank of India has given permission to 11 entities to start Payments Banks. On 19th August, RBI Governor had announced the list of 11 entities that has got the license to be a payment bank in the country.

Raghuram Rajan said that new payments banks would not create any competitive threat to the existing banks, and these new 11 entities would rather work as a “feeder” for the universal banks.

Small Finance Banks RBI

 

The RBI had got 41 applications for payment bank licenses and 72 applications for small finance bank licenses. Out of these 41 applicants, RBI had approved the 11 entities for the license. Reliance, Bharti Airtel, Paytm, Vodafone are also among those 11 applicants that have got approval from RBI. 

The list of small finance banks includes DHFL, IIFL Holdings, Lulu Forex, SKS Microfinance, UAE Exchange and Ujjivan Financial.

RBI is all set to announce the small finance banks next month.

The small finance banks can accept deposits and can also lend but on a small level. They can lend to small industries, micro business organizations, and small farmers. On the other hand, Payment Banks cannot perform lending operations. They cannot accept deposits beyond 1 lakh rupees limit and can’t issue credit cards. These banks can issue ATMs and Debit Cards.

Rajan stated that initiation of Payments Banks would revolutionize banking, make it very exciting for customers and existing lenders will have to improve service to retain depositors.

"I've no doubt banking will become very competitive, and universal banks have to provide full service to retain customers," Rajan said.