RBI Rejects One Banking Licence Application; Governor Malhotra Confirms, Name Yet to Be Disclosed

In a significant regulatory update, Reserve Bank of India (RBI) Governor Sanjay Malhotra confirmed on June 6 that one application for a banking licence has been rejected. The central bank has not yet disclosed the name of the applicant or the category of licence that was denied. The announcement comes amid growing interest among financial entities seeking entry into the universal and small finance banking sectors.

Multiple Applications Under Review; One Rejected, Disclosure Pending

Governor Malhotra stated that the RBI will soon release further details about the rejected application. This follows a surge in banking licence interest in recent months, with notable applicants such as AU Small Finance Bank and Ujjivan Small Finance Bank seeking conversion into universal banks, while Fino Payments Bank has applied to become a small finance bank. Additionally, non-banking financial companies (NBFCs) like Annapurna Finance and VFS Capital have submitted banking licence applications.

Highlights:

• One banking licence application rejected by RBI; name undisclosed.

• AU Small Finance and Ujjivan Small Finance seek universal bank status.

• Fino Payments Bank applies for small finance bank licence.

• NBFCs Annapurna Finance and VFS Capital also in the fray.

Standing External Advisory Committee Vetting Applicants

To assess the suitability and eligibility of banking licence aspirants, the RBI constituted a Standing External Advisory Committee (SEAC) on January 20. The committee is chaired by former RBI Deputy Governor MK Jain and includes prominent members such as RBI board director Revathy Iyer, former Executive Director Parvathy V Sundaram, ex-SBI MD Hemant Contractor, and former ICICI Prudential Life CEO NS Kannan.

The SEAC has been tasked with evaluating each application based on financial strength, governance, compliance history, and ability to operate a bank in line with RBI’s regulatory expectations.

Highlights:

• SEAC chaired by ex-RBI Deputy Governor MK Jain evaluating applications.

• Other members include experienced financial sector leaders and ex-regulators.

• Committee formed to ensure regulatory compliance, financial prudence, and institutional integrity.

Sectoral Implications of Rejected Licence Remain Unclear

While the RBI has yet to name the applicant whose licence was denied, market observers are closely watching for potential implications across the small finance, universal bank, and NBFC sectors. Given the ongoing consolidation in India’s banking space and increasing scrutiny from the regulator, the rejection is expected to signal a rigorous and high-standard licensing framework.

Highlights:

• Name and category of rejected application to be announced soon.

• Move reflects RBI’s firm stance on licence eligibility standards.

• Market awaits disclosure to gauge sectoral and applicant-specific impact.