In an attempt to broaden financial inclusion, the Reserve Bank of India (RBI) has published guidelines that will allow non-traditional entities like telecom providers, retail chains and corporate houses to set up their own banks.
These include small banks and payment banks, and the rules will also allow these players to set up joint ventures with existing commercial banks.
Some state-owned groups such as India Post have already been given permission to set up payment banks.
The new guidelines are less restrictive than those put forward in earlier drafts. Payment banks will have to retain a leverage ratio of 3%, will not be able to lend and will have a deposits cap of Rs 100,000 that can be invested in government securities. However, they will be able to issue debit cards, offer savings and current accounts, and launch a broad range of products, including mutual funds, insurance and pensions.
They will also be obliged to invest a minimum of 75% of demand deposit balances into government securities that are statutory liquidity ration (SLR)-eligible and one-year maturity treasury bills.
RBI is inviting parties that are interested in setting up a bank to apply by 16th January 2015.
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