One More Step Forward in RBI’s Financial Inclusion


RBI’s Financial Inclusion takes a step forward

  • RBI’s issue of banking licenses to IDFC and Bandhan Financial Services Private Limited, and its consideration of the application of Dept of Posts was welcomed by all and is expected to lead towards an ‘on-tap’ policy, including differentiated licenses.
  • Banks added in 1993-93 were obligated to open branches in rural areas, while banks added in 2003-04 were obligated to have 25% branches in semi-urban and rural locations with a population up to 9,999.
  • What is advantageous to Bandhan is its presence in rural areas and its joint liability model (JLG) extended to its entrepreneurial customers.
  • IDFC said the new license will enable them to increase their services, reduce dependency on loans, broaden revenue base, while assisting them in their goal to build depository franchise and enter retail banking. Their focus is to reach the farthest parts of India.
  • Arrival of competition is not a threat to strong deposit and retail franchises created by larger banks as the entrants will gradually scale up their branch and liability networks. This would even out competition and reduce risks of failure of new banks.

Exams Perspective:

  1. Conditions for providing new Banking licenses
  2. Advantages of newer banks
  3. RBI
  4. Financial Inclusion