RBI SETS 100-CR FLOOR CAPITAL FOR PAYMENTS, SMALL BANKS

A week after the budget announcement, the Reserve Bank of India on Thursday issued draft guidelines for small and payments banks to expand banking services and disburse small-ticket loans to businesses and farmers.

The minimum capital requirement for both payments and small banks will be ` 100 crore, out of which promoters will have to contribute at least 40%. A normal commercial bank requires a minimum capital of ` 500 crore.

“Both payments banks and small banks are ‘niche’ or ‘differentiated’ banks, with the common objective of furthering financial inclusion,” the RBI said.

Finance minister Arun Jaitley had said in his budget speech that “RBI will create a framework for licensing small banks and other differentiated banks. Differentiated banks, local area banks, payment banks etc are contemplated to meet credit needs of small businesses, unorganised sector, low-income households, farmers and migrant work force.”

An RBI-appointed panel had in January proposed the formation of such banks to enhance banking activities in a country where almost 40% of the population still do not have access to financial services.

The proposed small banks will provide basic banking products such as deposits and supply of credit. Payments banks will offer a limited range of products such as acceptance of demand deposits and remittances of funds.

Non-banking finance companies, business correspondents and PSUs among others can apply to set up a payments bank.

For small banks, resident individuals with 10 years of experience in banking, firms and societies will be eligible as promoters.