Rajan said such banks could be a path of migration to universal banks.
In February this year, about 72 entities and individuals had applied for small finance banks.
Those which have applied for small finance banks include housing finance firm DHFL, IIFL Holdings, Lulu Forex, SKS Microfinance, UAE Exchange and Ujjivan Financial.
Small finance banks can provide basic banking services like accepting deposits and lending to the unbanked sections such as small farmers, micro business enterprises, micro and small industries and unorganised sector entities.
On payments banks, Rajan said that they would not pose any competitive threat to the existing banks and these new entities would rather serve as 'feeder' for the universal banks.
Source : Thehindubusinessline