Chennai: In a move that intends to add more depth to the sector, the RBI plans to issue draft guidelines for ‘on tap’ licensing of Small Finance Banks by the end of August. However, the central bank needs more time to review the performance of Payments Banks before considering their licensing to be put ‘on tap’.
While issuing the guidelines for licensing of “Payments Banks” and “Small Finance Banks” in the private sector in November 2014, the RBI had mentioned that it would consider ‘on tap’ licensing of these banks after gaining experience in dealing with these banks.
Licences were issued to 10 Small Finance Bank. Further, eight of them have also been included in the second schedule of the RBI Act, 1934. A review of the performance of Small Finance Banks reveals that they have achieved their priority sector targets and thus attained their mandate for furthering financial inclusion.
Small Finance Banks offer basic banking services like accepting deposits and lending to unserved and underserved sections, including small business units, small and marginal farmers, micro and small industries and those in unorganised sector.
“There is a case for more players to be included to enhance access to banking facilities to the small borrowers and to encourage competition. It is, therefore, proposed to issue the draft guidelines for ‘on tap’ licensing of Small Finance Banks by the end of August 2019,” RBI said.
On tap licensing will enable entities to approach the central bank for obtaining licences for Small Finance Banks on meeting laid-down criteria. Eligible entities would not have to wait for licences as it would be available on a on-demand basis.
“The decision to issue draft for “on-tap” licensing of Small Finance Banks will add depth to this sector,” said Rajnish Kumar, Chairman, SBI.
