Recent News on Banking Licenses

Couple of months back, Reserve bank of India sanctioned license for IDFC and Bandhan Financial Services to set up banks. This was a surprising news to general public as well as the banking and non-financial institutions. There were almost 26 entities that applied for banking licenses which include Aditya Birla, Reliance capital, L &T Financial services and still more. The question that commonly rose was, what made RBI grant license to IDFC and Bandhan while neglecting other large organizations. The motive behind this selection was to overcome poverty and to increase private investments. A recent article in economic times spoke about India’s deficiency in meeting the credit rating standard. In better words, India’s investments couldn’t meet the credit rating standards. To push private sector investments, public sector has to take effort to drop money in economy which is considered to be impossible as India’s fiscal deficit is too high. This article conveys the weakness of India’s investment sector.

So, RBI offered licensing to IDFC which is basically an infrastructure lender. This licensing is hoped to improve the investments towards infrastructure from private sector. Bandhan Financial services, a microfinance company which focus more on poverty women. This financial institution provides loans and other services to poverty women. RBI hopes to reduce the poverty rate by licensing Bandhan which is in favor to the Indian women’s in poverty. There will always hold a fruitful reason for RBI’s actions. Hope the bottom line will be achieved.

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