New Delhi. Many small finance banks (SFBs) of the country want to become universal banks, like banks like SBI and BoB. Such demands are often raised from their side. But, former financial services secretary DK Mittal says that if the banking regulator Reserve Bank (RBI) relaxes some restrictions on SFBs, then most of them will not demand to become universal banks.

RBI issued guidelines in 2014

To promote financial inclusion in the country, RBI had issued guidelines for licensing SFBs in the private sector in 2014. After this, RBI gave licenses to a dozen institutions. According to RBI guidelines, it is necessary for SFBs to open at least 25 percent of their branches in unbanked rural centers. Apart from this, it is mandatory for them to give 75 percent of loans to the priority sector, while this limit is 40 percent for commercial banks.

Lifting the ban would be in national interest'

Mittal said, 'While issuing guidelines to make small finance banks universal banks, if RBI removes some of the restrictions imposed on SFBs, it would be in the larger national interest of financial inclusion. Talking about the restrictions, he said that RBI should consider allowing co-lending, 'pass through' certificates (PTCs) and securitization and setting up of subsidiaries.