Blog

MONTHLY ARCHIVES: AUGUST, 2016

Big Reform in Indian Banking, Emphasis on Financial Inclusion

Posted on August 01, 2016 by Sumita Kale

On 1st August 2016, the Reserve Bank of India issued the final guidelines for licensing of universal banks in the private sector. This is a huge reform in the banking sector, and coming in so close to the new niche banks, Payments Banks and Small Finance Banks, the sector is poised to get more competitive. 

The guidelines here ensure that inclusion is built into the business plan. Apart from the rule that the bank will have to comply with priority sector lending targets and sub-targets as applicable, it is also stipulated that, "The bank shall open at least 25 per cent of its branches in unbanked rural centres (population up to 9,999 as per the latest census) to avoid over concentration of their branches in metropolitan areas and cities which are already having adequate banking presence. RBI will, over time, define the mode of delivering banking services that qualifies as rural presence." The RBI still is more comfortable with the branch as a service point, but appears to be opening its mind to other channels as well.

By stipulating that, "The business plan will have to address how the bank proposes to achieve financial inclusion.", it is clear that the RBI continues to push banking towards the main aim of expanding access to all financial services for each and every citizen of this country.  

 

A CNBC TV 18 roundup of the development with some views from the financial sector can be read here at MoneyControl 

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