Reserve Bank Issues Final Norms for Small Banks

Reserve Bank of India issued final guidelines for payments and small banks that aim to take banking services to more people and small businesses.

The RBI aims to push financial inclusion by setting up these niche outfits, small finance banks that can have all-India operations and payments banks, which can accept more deposits.

The guidelines open up a window of opportunity for entities which did not bag new bank licences in April.

Shriram Capital, Janalakshmi Financial Services, Magma Fincorp and Muthoot Finance, among others, are expected to throw their hats into the ring to set up small banks.

The Department of Posts, Bharti Airtel, Vodafone India, Tata Teleservices, Western Union and online digital payment players such as Paytm, Oxigen and MobiKwik have expressed interest in floating payment banks.

The minimum paid-up equity capital for both small and payment banks has been pegged at Rs100 crore. Small banks will be required to maintain a minimum capital adequacy ratio of 15 per cent of the loans on a continuous basis.

The small bank will be required to extend 75 per cent of its credit to the priority sector. Payments banks can accept deposits, current and savings bank, from individuals, small businesses and other entities. However, they cannot accept non-resident Indian deposits.