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New Banking license issued; what’s in it for you?

Day before yesterday RBI finally issued banking licences to 2 out of 25 applicants. It has given inprinciple approval to IDFC & micro-finance lender Bandhan. This move by RBI shocked many as most of the industry experts had predicted that RBI will issue 4 new licenses and from which Reliance, LIC Housing Finance & L&T Fin Holdings were the favorites.

Bandhana Financial is a micro-finance institution based out in Kolkata and has got preference over other big corporate’s mainly because of it’s presence in North East India as hinted by the Finance Minister ‘PC’.

Bandhan Financial Service

The RBI said it assessed the quantitative and qualitative aspects of the applicants, including their financial statements, 10-year track record of running businesses, proposed business model for the bank and demonstrated capabilities for running a bank, plan for expanding inclusion, and culture of compliance and integrity. [source]

RBI last issued banking licenses a decade ago in 2004 to YES Bank and Kotak Mahindra Bank.

RBI plans to issue more licenses in time to come. RBI Governor said Banking licences will be an on-tap facility, meaning the central bank will keep issuing new licences to applicants it deems fit as and when required. [source]

So how will general public benefit from this?

  • New banks introduced means a lil more competition which will get consumers better deals (hopefully)!
  • Employment generation. New banks would provide employment to at-least 6K to 8K people.
  • Employment generation leads to best in the economy and growth in GDP.

Also check out: List of top banks in India.

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