Reserve Bank of India Governor Raghuram Rajan on Monday said small finance banks can revolutionise small lending, a segment large banks seldom cater to. Mr Rajan was delivering the Yashwantrao Chavan Memorial Lecture, and he spoke on Starting Up India.
Mr Rajan said small finance banks would be able to extend loans to small businesses, typically not served by large banks. “My sense is that small finance banks will create a revolution in the banking sphere. A revolution will create easier access to finance to all small entities looking for finance. For example, a small finance bank is mandated to give 50 per cent of its loans to small firms.”
“One example of the level-playing field and more competition is what we have been doing on the banking side,” mr Rajan said. “As you know we have licensed 22 new banks. I should have said 23 but one dropped out. So, of 22 new banks, two have already come in. And in the next year, we will probably get 18 more.” In August 2015, RBI had given in-principle licences to 11 payments banks, and in September 2015, it had given an in-principle licence to 10 entities — mandated to start operations within 18 months from the date of the licence — to start small finance banks.
Mr Rajan also told the audience that apart from one payments bank, Airtel M Commerce, a small finance bank, Capital Small Finance Bank, has received its final licence from RBI.
