Of the 10 provisionally licensed banks, three are all set to begin operations in a few months. The Reserve Bank of India has issued final license to Capital Local Area Bank, Suryodaya and the newly listed Equitas.
According to the RBI, the licensees have put in place the necessary systems and have met the regulatory requirements. They had satisfactory results for several eligibility criteria like foreign institutional investors limit, ticket size and even the total quantum of loans given to priority sector.
Given the increase in the number of small finance banks, the competition in the banking sector is likely to increase in the next few years. The competition between small towns and developed ones with respect to deposits is also expected to rise further as these companies are more likely to focus on the rural and semi- urban retail segments.
The managing director of Equitas, P N Vasudevan said that they are ready to roll out operations with 412 branches in a few days. They will be transitioning their business model to make it suitable for a small finance bank and are planning to get their existing customers to open accounts with them.
Public sector banks which currently hold a share of 70% in the market are likely to face a decline as a result of this increase in the number of private sector banks.
On a different note, RBI has cancelled the registration certificates of five NBFCs, while two others have surrendered their certificates to the central bank. The certificates for Simco Consultants, Rajvir Marketing and Investment, Lunkad Securities, Shri Jaya Investments Agency and Crystal Investments stands cancelled.