RBI guidelines for payment and small finance banks

Introducing a new concept of niche banking in India, Reserve Bank of India has issued final norms for payment banks and small finance banks that would allow mobile firms and supermarket chains, among others, to enter the banking arena to cater to individuals and small businesses.

The move is aimed at deepening financial inclusion and boost saving habits.

The guidelines are:

  • Those seeking to set up these two new categories of banks would need minimum Rs 100 crore of capital and fulfill the necessary ‘fit and proper’ criteria.
  • The interested firms would need to apply before 16 January 2015 for first round of such permits.
  • Among others, existing NBFCs and micro finance lenders would be allowed to set up small finance banks.
  • Large public sector enterprises and big industrial houses would not be allowed to establish such banking entities.
  • For payment banks, which would not be allowed to undertake lending activities, the State-run entities would be eligible to apply.
  • Such banks will be allowed to issue ATM/debit cards as also other pre-paid payment instruments, but not the credit cards.

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