IDFC Bank Ltd, a subsidiary of diversified financial services firm IDFC Ltd, has received the final nod from RBI to start its banking operations, it said on Friday.
IDFC, which counts amongst its shareholders private equity investor Actis besides Khazanah and Government Pension Fund Global, the sovereign wealth funds of Malaysia and Norway, respectively, was one of the two companies besides Bandhan to receive an in-principle approval by RBI to start retail banking operations in April last year. Now it has received the formal banking licence.
IDFC Ltd’s share price shot up 4.5 per cent after the announcement but later moderated to end the day at Rs 157.3 a share, up 2.58 per cent in a weak Mumbai market on Friday.
IDFC Bank will be launched in October 2015, a company spokesperson said.
Bandhan got its final nod last month and is set to start operations from August 23.
IDFC Bank will be the 24th private sector lender to start operations and the second this year after Bandhan. India also has 27 state-run banks to serve 1.2 billion people. While these public sector lenders led by SBI still comprise bulk of the business, private sector banks have been fast gaining ground.
The entry of new banks into the system provides a fresh lease of life to the sector that is riddled with rising incidence of non-performing assets or bad loans. While the Reserve Bank has granted licence to two companies to be universal banks, the process is underway to create two new set of smaller banks—small finance banks and payments banks.
Several firms, including some startups, have applied to obtain a licence under one of the two categories. RBI is expected to announce the names of the first set of successful applicants next month.
With the reach of the banking sector still largely limited to urban areas efforts by the government via Jan Dhan Yojana and other schemes are expected to bring more people at the bottom of the pyramid within the ambit of financial integration.