A Step To Financial Inclusion By Rbi
9/24/2015 05:17:00 PM
RBI grants small finance banks
licence to 10 entities which will shake up Microfinance Business:
- Au Financiers
- Capital Local Area Bank
- Disha Microfin
- Equitas
Holdings
- ESAF Microfinance and Investments
- Janalakshmi Financial Services
- RGVN (North East) Microfinance
- Suryoday Micro Finance
- Ujjivan Financial
Services
-
Utkarsh Micro Finance.
Of
the 10 shortlisted candidates for small bank licence by the Reserve Bank of
India, eight are micro finance institutions (MFIs), one mainly a commercial
vehicle financier and one a local area bank. Under the banking format they can
provide multiple financial products including savings to the under-served
individuals and MSMEs.
The
RBI clearly restricts these banks to operate in low-income segment. 75 per cent
of the total credit extended by these banks should be given to borrowers who
are in the priority sector. Low-income segments will be mainly operated by
these banks. This can give a major boost to financial inclusion and
credit-expansion to unbanked areas given that in this case financial inclusion
wouldn’t be a charity forced by regulation like the existing commercial banks.
In this case it would be the mainstay of the business. That’s good news for the
Indian low income segments.
Once
these firms enter the banking industry, logically, the bigger commercial banks
will face intensified competition in the cheaper deposit and small-value loan
market. State-run banks, which used to have dominance in rural areas of the
country with their reach, will find competition tougher if the new set of banks
hit the market with competitive rates of interest to poach customers. Public
banks will have to work harder.
This
will impact banking industry in a big way: The entry of small and payments
banks mark the biggest banking revolution India has witnessed after the
nationalization of banks. This will create positive disruptions in the
country’s banking sector, intensifying competition, thus making banking more
affordable for the common man.
RBI grants small finance banks
licence to 10 entities which will shake up Microfinance Business:
Reserve
Bank of India has granted in-principle licence for small finance banks to ten
entities. The name of the applicants that have been granted the licence
include-
Utkarsh Micro Finance.
Of
the 10 shortlisted candidates for small bank licence by the Reserve Bank of
India, eight are micro finance institutions (MFIs), one mainly a commercial
vehicle financier and one a local area bank. Under the banking format they can
provide multiple financial products including savings to the under-served
individuals and MSMEs.
The
RBI clearly restricts these banks to operate in low-income segment. 75 per cent
of the total credit extended by these banks should be given to borrowers who
are in the priority sector. Low-income segments will be mainly operated by
these banks. This can give a major boost to financial inclusion and
credit-expansion to unbanked areas given that in this case financial inclusion
wouldn’t be a charity forced by regulation like the existing commercial banks.
In this case it would be the mainstay of the business. That’s good news for the
Indian low income segments.
Once
these firms enter the banking industry, logically, the bigger commercial banks
will face intensified competition in the cheaper deposit and small-value loan
market. State-run banks, which used to have dominance in rural areas of the
country with their reach, will find competition tougher if the new set of banks
hit the market with competitive rates of interest to poach customers. Public
banks will have to work harder.
This
will impact banking industry in a big way: The entry of small and payments
banks mark the biggest banking revolution India has witnessed after the
nationalization of banks. This will create positive disruptions in the
country’s banking sector, intensifying competition, thus making banking more
affordable for the common man.
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