Financial inclusion is key for new licence: Subbarao

Reserve Bank of India (RBI) Governor D. Subbarao, on Monday, reiterated that the financial inclusion plan of applicants would be an important criterion for procuring new bank licences in the private sector.

In its guidelines released last month for issuance of new bank licences to private sector entities, the apex bank had asserted that an important criterion for processing the applications from private sector for entering the banking field would be their business model which should provide for financial inclusion. Dwelling on the issue while addressing a select gathering at an event here, Dr. Subbarao said: “We have also said that new banks are required to establish at least 25 per cent, a quarter, of their branches in places with less than 10,000 population...I do hope that the new bank applicants indeed everybody interested in financial inclusion will come up with innovative and imaginative ideas.”

While interested corporates will have to file their applications with the RBI by July 1 this year, the entry norms prescribe that private corporates and public sector entities with 10 years experience will be eligible to apply for a new licence. The initial paid-up capital for the new banks has also been set at Rs.500 crore to ward off the entry of non-serious players.

Pointing to the numerous challenges that lay ahead in the process of financial inclusion, the RBI chief said a liberalised KYC (Know Your Customer) norm along with the unique identity number would help simplify the path. Banks, he said, still regard financial inclusion as an obligation and not as a business opportunity and, therefore, the reach of inclusion was less than desired.

Asking banks to take up financial inclusion as a business opportunity to help the poor come under the banking operation net, Dr. Subbarao said: “A part, indeed an important part, of the mandate of central banks is financial stability and an essential prerequisite for financial stability is financial literacy and [the] central bank has a unique leverage in providing financial literacy.”

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Printable version | Jan 24, 2022 9:12:12 PM |

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