RBI issues guidelines for small banks

Wish to set up a bank in India?

The draft guidelines on Payments Banks and Small Banks issued by the Reserve Bank of India (RBI) on Thursday have paved the way for individuals with 10 years' experience in banking and finance sector to start a bank with a Rs 100 crore capital, of which 40% contributed by promoters.

These banks are meant to help in reaching financial inclusion goals of the government, providing credit to the poor, marginal farmers and those who do not have bank accounts.

While Payments Banks cannot undertake lending activities, they will be allowed to undertake remittances and manage deposits, Small Banks can undertake various kinds of lending activities for small businesses and the agriculture sector.

The Payment Banks will be involved in providing payments and remittance services and demand deposit products to small businesses and low-income households. They will initially be restricted to holding a maximum balance of Rs1 lakh per customer. These banks will be allowed to raise current deposits, and savings bank deposits.