The Reserve Bank of India on Thursday 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 an 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 ₹100 crore.
Who are eligible? Eligible promoters for a small bank include resident individuals/professionals with experience in banking and finance; and companies and societies. Existing non-banking finance companies (NBFCs), microfinance institutions and local area banks can also opt to convert into a small bank. The RBI said proposals from large public sector entities and industrial and business houses, including NBFCs promoted by them, will not be entertained to set up small banks.
In the case of payment banks, the eligible promoters will include existing non-bank prepaid payment instrument issuers and other entities such as individuals/professionals; NBFCs, corporate business correspondents, mobile telephone operators, and super market chains.
A promoter/promoter group can have a joint venture with an existing scheduled commercial bank to set up a payment bank, subject to the stake holding complying with the Banking Regulation Act.
Key activities The small bank will primarily undertake basic banking activities of acceptance of deposits and lending to un-served and under-served sections, including small business units, small and marginal farmers, micro and small industries and unorganised sector entities.
Small banks will be required to maintain a minimum capital adequacy ratio of 15 per cent of the loans on a continuous basis.
In the draft guidelines, the RBI had suggested that small banks would have a restricted area of operations (possibly contiguous districts in a homogenous States). However, in the final guidelines, these restrictions have been removed. 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.
The payment bank will initially be restricted to holding a maximum balance of ₹1 lakh per individual customer. While the bank can issue ATM/debit cards, it cannot issue credit cards.
It can contract outside liabilities (deposits) but not exceeding 33.33 times (against 20 times in the draft guidelines) its net worth.