Banking Sector in India: Niche Banks

The RBI has come up with guidelines for opening smaller particular service oriented banks.

It has cleared the decks for two kinds of banks recently: Small Banks and Finance Banks.

Small Banks/ Small Finance Banks: The main aim of these banks will be to further the financial inclusion by functioning as a savings vehicle and also provide to MSE’s and other unorganized sector entities. These banks will have to have a sizable portion of their branches in the rural areas.These banks will have to maintain the same capital requirements of CRR and SLR as its mandatory for normal banks. The minimum paid up capital of these banks will be Rs. 100 crore. These banks will have the option to turn into full fledged banks in the future.

Payments Banks: The main of these banks will also be improving financial inclusion, however these banks will be primarily focusing on collection of deposits and the facilitation of payments and remittances to the customers. These banks won’t be allowed to provide any loans. They will try to provide the customers with low cost banking services and so invest heavily in the technological field. The minimum capital requirement will also be Rs. 100 crores.

Hopefully, we will be seeing the first Small Finance banks and Payment banks coming up in the country by the early 2015.

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