HYDERABAD: The Reserve Bank of India (RBI) will issue guidelines and invite applications to set up small finance banks, according to its Governor Raghuram Rajan.
The move, which will benefit small customers, comes after the central bank issuing guidelines for payment banks to expand the reach of banking services.
“In the next few weeks, we will issue guidelines and invite applications for small finance banks...to cater to smaller customers,” Rajan said.
Urging existing banks to cooperate with mobile service providers, Rajan said, “We have been trying very hard to get banks to cooperate with mobile companies (service providers). There have been some alliances but the level of transactions done in this way are still very low,” he said.
Speaking at the Institute for Development and Research in Banking Technology (IDRBT) 10th excellence awards function here on Wednesday, Rajan said competition coming through these alliances should not be underestimated. “That is the reason why we have progressed on putting out guidelines for payment banks ... to allow mobile companies and perhaps some software companies and perhaps some retail houses to enter into the business of payment banking,” he said.
According to Rajan, a viable model would be a payment bank, which essentially allows access throughout the country and has tie-ups with commercial banks to offer services over and beyond a payment bank.