The Reserve Bank of India has come out with operating guidelines for small finance banks and private banks, which provide an exemption for small finance banks from the prevailing regulatory ceiling on inter-bank borrowings till the existing loans mature or up to a period of three years, whichever is earlier. Thereafter, inter-bank borrowings of these banks will be on par with scheduled commercial banks. The exemption is only applicable to the legacy borrowings that are migrated to the opening balance sheet of these banks on the day of commencement of their operations. Besides, these banks are permitted to purchase portfolios of loans classified as standard assets only from banks and NBFCs for the specific purpose of meeting the sub-targets within the 40% priority sector lending target as applicable to commercial banks. They are not permitted to purchase non-performing loans. The guidelines also specify that both small finance banks and payments banks can deploy digital tools to open bank accounts. Mobile banking customers can open bank accounts with the payments banks promoted by telecom companies seamlessly, provided all the KYC formalities are already met. Payments banks will be allowed to participate in call money and CBLO market as both borrowers and lenders, the guidelines said.
