On 15 April, The Reserve Bank of India(RBI) released a list of applicants who applied for Universal Banking and Small Finance Banking Licenses. Sachin Bansal’s Chaitanya India Fin Credit Private Limited is one of the applicants for a Universal Bank License. To choose the right candidate, the RBI has released guidelines for ‘on tap’ Universal Banks Licenses on August 1, 2016, whereas the bank released guidelines for ‘on tap’ Small Finance Banks in the Private Sector on December 5, 2019.
‘On tap’ license is a new procedure to apply for a bank license throughout the year. Earlier, RBI used to provide the specific time frame to apply for such licenses. The ‘On tap’ concept is a relief for the firms that want to apply for private sector banking license whenever required.
List of Applicants for Universal Banks and Small Finance Banks Licenses
In a recent development related to ‘on tap’ licensing of Universal Banks and Small Finance Banks in the private sector, the RBI has revealed the names of applicants interested in such licensing. The bank made the list public through an official press release on April 15.
As per the RBI list, UAE Exchange and Financial Services Limited, The Repatriates Cooperative Finance and Development Bank Limited (REPCO Bank), Chaitanya India Fin Credit Private Limited, Shri Pankaj Vaish and others have applied for Universal Banking license.
The list also includes the names of VSoft Technologies Private Limited, Calicut City Service Co-operative Bank Limited, Shri Akhil Kumar Gupta and Dvara Kshetriya Gramin Financial Services Private Limited for Small Finance Banks License.
The RBI follows a strict procedure to choose the right applicants for Universal Banking and Small Finance Banking in the private sector. First, the bank will check their candidature through the guidelines prepared by the authorities for Universal Banks and Small Finance Banks separately. Second, applications will be scrutinised by the RBI panel constituted for this activity. Standing External Advisory Committee(SEAC) announced on March 22, 2021, will evaluate the application in detail.
How RBI Chooses the Right Firms for Universal Banks and Small Finance Banks Licenses?
As per the details shared by RBI, former RBI deputy governor, Shyamala Gopinath will be the chairman of the panel selected by the central bank.
Other members of the committee include Revathy Iyer, Director, Central Board, Reserve Bank of India, B. Mahapatra, former Executive Director, Reserve Bank of India and presently Chairman, National Payments Corporation of India (NPCI), T.N. Manoharan, former Chairman, Canara Bank and Hemant G. Contractor, former MD, State Bank of India and former Chairman, Pension Fund Regulatory and Development Authority (PFRDA).
The RBI guidelines for ‘on tap’ licensing of universal banks in the private sector dated August 1, 2016, and Guidelines for ‘on tap’ Licensing of small finance banks in the private sector dated December 5, 2019, indicates that the applications will first be reviewed by the RBI to check the minimum eligibility of the applicants. Shortlisted applicants will be forwarded to the main panel for further review.
Current SEAC includes the noted personalities from banking, financial sector, and other banking-related areas. Reserve Bank will also announce the constitution of SEAC for working purposes. The SEAC tenure will be for three years.
In a similar procedure conducted in 2014, the RBI approved the applications of IDFC First Bank and Bandhan Bank to issue them universal banking licenses. In 2018, the central bank provided 10 small finance bank licenses to Janalakshmi Financial Services, Ujjivan Financial Services based in Bengaluru, RGVN (North East) Microfinance based in Guwahati among others.