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Universal, small finance banks: 8 applicants for on-tap licences

On March 22, the RBI set up the SEAC — a five-member committee headed by former RBI Deputy Governor Shyamala Gopinath for evaluating applications for universal banks as well as small finance banks.

By: ENS Economic Bureau | Mumbai |
April 16, 2021 3:13:42 am
Reserve Bank of India, universal banks, small finance banks, economy news, indian express economy newsThe RRA 2.0 will focus on streamlining regulatory instructions, reduce compliance burden of regulated entities by simplifying procedures and reduce reporting requirements, wherever possible.

The Reserve Bank of India (RBI) on Thursday unveiled the names of eight applicants for ‘on-tap’ licence of universal banks and small finance banks.

According to the RBI, the four applicants for universal bank licence are: UAE Exchange and Financial Services Ltd, Repatriates Cooperative Finance and Development Bank Limited (REPCO Bank), Chaitanya India Fin Credit Pvt Ltd and Pankaj Vaish and others. The four applicants small finance banks include VSoft Technologies Pvt Ltd, Calicut City Service Co-operative Bank Ltd, Akhil Kumar Gupta and Dvara Kshetriya Gramin Financial Services Pvt Ltd.

On March 22, the RBI set up the SEAC — a five-member committee headed by former RBI Deputy Governor Shyamala Gopinath for evaluating applications for universal banks as well as small finance banks. Other members of the panel include RBI Central Board Director Revathy Iyer, National Payments Corporation of India Chairman B Mahapatra, former Canara Bank Chairman TN Manoharan and former Chairman of Pension Fund Regulatory and Development Authority Hemant Contractor.

Explained

Guidelines issued in 2016

As per the on-tap licensing of universal banks guidelines issued in August 2016, resident individuals and professionals with 10 years of experience in banking and finance at a senior level too are eligible to promote universal banks. However, large industrial houses are excluded as eligible entities but allowed to invest.

The applications for universal banks and small finance banks will be initially screened by the Reserve Bank to ensure prima facie eligibility of the applicants. “The Standing External Advisory Committee (SEAC) comprising eminent persons with experience in banking, financial sector and other relevant areas, will evaluate the applications thereafter. The tenure of this SEAC will be for three years,” the RBI said.

An internal working group of the RBI last year proposed an overhaul of the licensing policy for private banks and suggested allowing large corporate and industrial houses to float banks in India after suitable amendments to the Banking Regulation Act. Although several of the large corporate houses in India had applied for a banking licence in the past, the RBI had rejected these proposals.

However, the RBI has not yet approved or rejected the recommendations of the working group. Former Reserve Bank Governor Raghuram Rajan and ex-Deputy Governor Viral Acharya criticised the proposal to allow corporate houses to float banking entities, saying that it will lead to “connected lending” which, according to them, is “invariably disastrous”.

Reserve Bank sets up RRA 2.0

The RBI has decided to set up a new Regulations Review Authority (RRA 2.0) for a period of one year from the date of its establishment to review the regulatory prescriptions internally, as well as seeking suggestions from the RBI regulated entities and other stakeholders on their simplification and ease of implementation.

The RRA 2.0 will focus on streamlining regulatory instructions, reduce compliance burden of regulated entities by simplifying procedures and reduce reporting requirements, wherever possible. M Rajeshwar Rao, Deputy Governor, has been appointed as the Regulations Review Authority. The Authority would be set up for a period of one year from May 1, unless its tenure is extended by the RBI.

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