Paradigm Shift To ‘On Tap' Universal Bank Licences

In its monetary policy statement for 2014-15 on 1 April 2014, the Reserve Bank of India (RBI) announced that it would work on a framework for granting licences "on tap" to universal banks, and for granting of differentiated bank licences with the intent to "to expand the variety and efficiency of players in the banking system while maintaining financial stability". This statement had been preceded by a policy paper in August 2013, which recommended reviewing the then prevailing policy of granting licences for establishment of banks on a "stop and go" basis, and instead put in place a continuous authorisation policy.

The RBI issued a draft framework on 5 May 2016 for public comment on granting licences to universal banks on a continuous basis. The draft framework is based on the feedback received on the policy paper, the RBI's experience with the granting of licences to IDFC and Bandhan to establish universal banks, and its experience with the granting of