RBI to explore licences for custodian, wholesale & long-term financing banks
Other | Photo Credit: Reuters

Reserve Bank of India governor Raghuram Rajan, who granted licences to 21 firms to start small finance banks and payments banks last year, is now exploring more niche categories of lenders as he opens up the tightly regulated sector.

In its bi-monthly monetary policy review statement on Tuesday, the RBI said it will explore possibilities of licensing other differentiated banks such as custodian banks and banks concentrating on wholesale and long-term financing. It added that it will come up with a discussion paper on the new categories by September 2016.

The move comes after the RBI gave out two new licences for retail banking in 2014 and followed it up with a framework for two niche set of banks last year when it permitted 10 firms to start small finance banks and 11 companies to float payments banks. The initiatives were aimed to expanding the reach of the formal banking system in a country where half the population has no access to banking services.

The central bank on Tuesday stopped well short of moving toward putting universal banking licences on tap, as it has previously said to expand the scope of the banking industry, but signaled it would create more categories of banks. This may open up the financial sector to more participants.

Among other pronouncements, the RBI said it will issue a fresh discussion paper by the end of this month on large borrowers meeting a part of their funding requirements from markets.

It will also come with draft guidelines for a standardised approach for measuring counterparty credit risk and for securitisation framework in this quarter.

The monetary authority also reviewed countercyclical capital buffers and decided that it was not necessary to be activated at this point in time.

In the financial markets field, the RBI talked about allowing futures on an appropriate money market rate, a policy framework to authorise electronic platforms with linkage to an approved central counterparty for settlement and reviewing guidelines for Commercial Paper.

The RBI also said it will simplify the application forms and process for new non-banking finance companies and strengthen the infrastructure for business correspondents with graded certification and training programme by June 30.

For full transcript of its policies under the works, click here.

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