The new approach to granting differentiated licences to small finance banks and payment banks is welcome, especially given the current context The new approach to granting differentiated licences to small finance banks and payment banks is welcome, especially given the current contextINDIA’S central bank has often been criticised for being too conservative when it comes to lifting the entry barriers for new players in the banking sector. Three years after the RBI approved licences to 10 small finance banks, the regulator has now issued the final guidelines for licensing such banks throughout the year or on tap, encouraged presumably by the performance of some of these entities. Small finance banks have the potential to provide an alternative to some of the existing institutions with their mandated focus on small and medium businesses, the informal sector, small and marginal farmers and thus on increasing financial inclusion and serving a variety of unserved clients in the hinterland and tier three and four cities and towns. The experience of the last two decades has shown that a competitive banking system can help foster a more inclusive financial sector. Small finance banks could well occupy the space being gradually vacated by some of the bigger banks and complement them too in segments such as micro and small businesses and the informal sector.
Source: Indian Express December 08, 2019 23:02 UTC