The Reserve Bank of India is set to further expand the country’s banking landscape with licences to new types of banks like wholesale banks or custodian banks. This is in addition to the two types of differentiated bank licences granted in 2015, namely, payments banks and small finance banks.
“In addition to recently licensed differentiated banks such as payments banks and small finance banks, the Reserve Bank will explore the possibilities of licensing other differentiated banks such as custodian banks and banks concentrating on wholesale and long-term financing,” the central bank said on Tuesday while announcing its first bi-monthly policy review. RBI will put out a discussion paper on the issue by September 2016.
Wholesale banks are lenders that cater to large corporates which require long-term finance, particularly those engaged in infrastructure development. Typically, these banks raise long-term funds which are exempted from maintaining regulatory requirements like cash reserve ratio and statutory liquidity ratio.
Custodian banks, on the other hand, are specialised financial institutions mainly responsible for safeguarding a firm’s or individual’s financial assets, and are typically not engaged in conventional retail lending.
“The move will help the Indian financial sector get some niche and specialised players of global and Indian origin and create a focus on specific areas, which will help both institutions to become more competitive and innovative,” Shinjini Kumar, CEO designate, Paytm told The Hindu. Paytm has received a licence to start a payments bank. RBI has granted licences to 11 entities to start payments banks and 10 entities for opening small finance banks. RBI governor Raghuram Rajan also said at the post-policy interaction with the media that the banking regulator will issue norms for on-tap for universal banks. Till date, the RBI has been offering banking licences for a limited period of time.
In 2014, RBI allowed banking licences to two entities, infrastructure financier IDFC and micro lender Bandhan Financial. The Indian corporate sector has been demanding on-tap process for a long time.
To explore licensing of banks such as custodian banks, and long-term financing banks
