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RBI gets 72 applications for small banks, 41 for payments bank licence

The Reserve Bank of India (RBI) has set up a four-member external committee headed by Nachiket Mor, director, central board of RBI, to whet applications for payment banks and another external committee headed by former deputy governor Usha Thorat to whet applications for small finance banks.

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The Reserve Bank of India (RBI) has set up a four-member external committee headed by Nachiket Mor, director, central board of RBI, to whet applications for payment banks and another external committee headed by former deputy governor Usha Thorat to whet applications for small finance banks.

RBI received 72 applications for small finance banks and 41 applications for payments banks, on February 2, the last day for submitting the applications. These new category of banks are expected to provide banking services to the poor and marginalised who are outside the ambit of the banking system.

The external advisory committee for payments banks will have Nachiket Mor as the chairman and the other three members include Roopa Kudva, former MD & CEO rating agency Crisil, Shubhalakshmi Panse, former chairman and managing director, Allahabad Bank and Deepak Phatak, chair professor, IIT-Bombay. The external advisory committee for small finance banks will MS Sahoo, secretary Institute of company secretaries of India and MS Sriram, professor, IIM Bangalore, among members.

The guidelines for licensing of small finance Banks and Payment Banks were issued on November 27, 2014. The applications will initially screened by the RBI to ensure prima facie eligibility of the applicants
Key applicants for the small bank licence include IIFL Holdings, Repco Micro Finance, UAE Exchange & Financial Services, Jayalakshmi Automotives. The microfinance institutions looking to convert themselves into a small banks are SKS, Utkarsh and Ujjivan Financial Services, Jagaran Microfin Pvt Ltd, Jainco Projects (India) Ltd, Janalakshmi Financial Services, Bengaluru, Kerala Permanent Benefit Fund Ltd, Aluva, Kosamattam Finance Ltd.
Manish Khera, one of the applicants in the individual capacity for a small bank, told dna, "We are working among the marginalised sections in central India, Jharkhand and Chhattisgarh. We currently serve migrant population and MSME customers. We are the business correspondents for Union Bank of India."

Notable applicants for payments banks include: Reliance Industries, Tech Mahindra, AB Nuvo Ltd, Airtel M Commerce, Cholamandalam, Fino PayTech, India Post, ItzCash, NSE Strategic Investment Corp, Reliance Industries, Sun Pharma chief Dilip Shangvi, Kalpataru, Kishore Biyani, NSDL, Tech Mahindra, Videocon d2h, Vodafone m-pesa, among others.

The small finance banks will undertake basic banking activities of accepting deposits and lending to the unbanked sections like micro business units, small and marginal farmers, micro and small industries and unorganised sector entities. At least 50% of its loan portfolio should constitute loans and advances of upto Rs 25 lakh. They can accept deposits and function like a mini bank. With a satisfactory track record a small finance bank to transition into a universal bank provided it has an impeccable track record.

While payment banks can offer payments and remittance services, they cannot issue credit cards or accept deposits of over Rs 100,000. They, however, can issue ATM and debit cards. They can also distribute simple financial products like mutual funds and insurance products.

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