The Reserve Bank on Monday raised the minimum capital requirement for small finance banks to Rs 200 crore and allowed Payments Bank to upgrade as SFBs. Moreover, the net worth of all the SFBs currently in operation exceeds Rs 200 crore.
Issuing the revised guidelines, the Reserve Bank said that for Primary (Urban) Cooperative Banks (UCBs) wishing to voluntarily convert to SFBs, the initial net worth requirement would be at Rs 100 crore, which will have to be increased to Rs. 200 crores within five years from the date of commencement of business.
Payments Banks can apply for conversion to SFB after five years of operations if they are otherwise eligible under the guidelines, it said.
Meanwhile, Fino Payments Bank, in a statement, said the bank has already applied for an SFB license as per regulatory guidelines on Payments Bank conversion to SFB.
Fino said the regulator is examining the application and is awaiting further comments from the RBI on the process.
According to the notification, “SFBs will be given scheduled bank status immediately after commencement of operations”.
The banks will have general permission to open banking shops from the date of commencement of operations, it said.
The Reserve Bank of India (RBI) last issued guidelines for licensing small finance banks in the private sector on November 27, 2014.
Consequently, it issued in-principle approval to 10 candidates, and they later established banks.
Most of these SFBs are now listed on stock exchanges. Kerala-based ESAF Small Finance Bank is the latest to go public. It was listed in November last year.
SFBs are expected to offer basic banking services, accepting deposits and lending to unserved and underserved sections, including small business units, small and marginal farmers, micro and small industries, and units in the unorganized sector.
The difference between SFBs and Payments Bank is that the latter is not allowed to lend.
Payments Bank can provide basic savings, and deposit, payment and remittance services to people without access to the formal banking system.
According to the norms, SFBs are subject to most of the prudential norms that scheduled commercial banks have to adhere to. For example, they must maintain a cash reserve ratio (CRR), or a portion of deposits to be separated with the central bank, and a statutory liquidity ratio (SLR), or the portion of deposits to be invested in government securities, as stipulated. for commercial banks.
About 75 percent of the credit advanced by small finance banks will have to go to sectors that are considered part of the so-called priority sector, including agriculture, small businesses and poor earners.
Commercial banks must compulsorily lend 40 percent of their net bank credit to such sectors.