Niche bank licence rules in the works

Mumbai, July 4: The Reserve Bank of India (RBI) today said it would issue guidelines for both on-tap and niche banking licences this fiscal, keeping the hopes alive for those who had missed out in the previous round.

RBI deputy governor R. Gandhi today said the central bank was keen to allow more players into banking and the norms would be issued later this year. On-tap licences will be given to entities keen on offering universal banking services, while niche permits are for those offering specialised banking.

In April, the RBI had granted licences only to Bandhan Financial Services and IDFC among the 25 aspirants that included big corporate houses such as Reliance Capital, Aditya Birla Nuvo, Bajaj Finserv and LT Finance.

The central bank had then reiterated that it would use the previous exercise to revise the norms and look to give licences more regularly.

RBI governor Raghuram Rajan had, however, indicated that niche banks would be given a chance first.

Banking circles believe the RBI would come up with norms for payment banks. The proposal of a payment bank was mooted by the Nachiket Mor committee. Such a lender will only provide services such as deposits or the opening up of accounts and remittances. It will not provide loans.

India Post, one of the aspirants for a licence, may be keen on a payment bank.

This is not the first time that the RBI has reiterated its plan to set up banks that offer specific services or open its window to issue licences on-tap.

The BJP had objected to the central bank’s move to go ahead with banking permits in April as it wanted the new government at the Centre to play a role.

The RBI had recently come out with a detailed timeline for regulatory approvals where it said aspirants would know the result of their applications within 90 days.

Gandhi said the RBI would assess the monsoon’s impact at a later date as it was too early to come to a conclusion.

Borrowing limit

The RBI has relaxed norms for overseas investment by Indian corporates by raising their borrowing limit.

However, “any financial commitment, exceeding $1 billion in a financial year, will require the prior approval of the RBI even when the total financial commitment is within the eligible limit under the automatic route”.

The financial commitment should be limited within 400 per cent compared with the earlier level of 100 per cent of a company’s net worth.