Banks may get access to long-term bonds for infrastructure building

Written by feBureau | Mumbai | Updated: Apr 22 2014, 10:38am hrs
The Reserve Bank of India (RBI) will open up the banking space to more entrants once it revisits the existing guidelines. The central bank has, in the past, observed that it wants more differentiated players in the system and that licences would be available on tap; in keeping with this philosophy, windows for accepting applications will be opened at intervals.

The RBI is also keen that intermediaries are able to access long-term funds for infrastructure building in the country. It might even consider allowing banks to access long-term bonds, but exempt these liabilities from regulatory obligations such as Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).

The central banks longer-term objective is to have different kinds of intermediaries catering to diversified needs in other words, a horses-for-courses policy. In this context, the central bank is taking a closer look at the recommendations of the Nachiket Mor committee report and will crystallise its views shortly on how the suggestions can be taken forward.

The Usha Thorat committee report on non-banking finance companies (NBFC) will also be studied. Earlier this month, the RBI awarded in principle banking licences to Bandhan, a microfinance institution and IDFC, an infrastructure lender.

The Mor committee had suggested the setting up of payments banks and wholesale banks; and the central bank will consider how best this could be done. Payments banks are expected to invest the float that they have in government securities, using the returns to cover costs. It is possible these banks will operate as joint ventures, with telecom companies as one of the partners.

The central bank is also keen on having smaller banks operating in the system perhaps with a capital of around R50 crore rather than the R500 crore required for universal banks currently. It believes these banks could play a useful role.