Small finance bank licences in September, says Raghuram Rajan

Mumbai, August 20

After granting approval to 11 entities for payments banks, RBI today said it will announce small finance bank licences next month and allayed concerns that these new entities can pose any threat to existing banks.

RBI Governor Raghuram Rajan said new payments banks would not pose any competitive threat to the existing banks and these new entities would rather serve as 'feeder' for the universal banks. The RBI had received 72 applications for small finance bank licences and 41 applications for payment bank licences.

Those having applied for small finance banks include DHFL, IIFL Holdings, Lulu Forex, SKS Microfinance, UAE Exchange and Ujjivan Financial.

Rajan said RBI would announce small finance bank licences next month.

The small finance banks can provide basic banking services like accepting deposits and lending to the unbanked sections such as small farmers, micro business enterprises, micro and small industries and unorganised sector entities.

The payments banks would be allowed to provide payments and remittance services, but cannot issue credit cards or accept deposits beyond Rs 1 lakh. They can issue ATM and debit cards and also distribute mutual fund and insurance products.

Nudges banks to cut lending rates

RBI Governor Raghuram Rajan on Thursday said there is a need for banks to cut their lending rates anticipating the benefits which will be accruing from the central bank's rate cuts.

"I think there is something to be said for the fact of the slow pace of transmission, that some front loading by the banks themselves may be useful," he said speaking at the second SBI economics and banking conference.

The RBI has been asking banks to cut their rates and transmit the benefits to end borrowers ever since it started reducing rates this year. It has flagged transmission of previous actions as one of the pre-requisites for further cuts.

According to RBI, banks have cut by an average of 0.30% as against its 0.75% cut in the key lending rate in 2015. — PTI