RBI issues guidelines for licensing of small financial banks in the private sector

Dec 06, 2019 | by Avantis RegTech Legal Research Team

Finance & Taxation Compliance

The Reserve Bank of India (RBI) on December 05, 2019, issues guidelines for ‘on tap’ licensing of small finance banks in the private sector. RBI had issued the Guidelines for licensing of small finance banks on November 27, 2014. These guidelines include the provision of savings vehicles, and supply of credit to small business units; small and marginal farmers; micro and small industries; and other unorganised sector entities, through high technology-low cost operations.

The major amendments from the earlier Guidelines are as follows:-

(i) The licensing window will be open on-tap; 

(ii) minimum paid-up voting equity capital or net worth requirement shall be Rs. 200 crore; 

(iii) for Primary (Urban) Co-operative Banks (UCBs), desirous of voluntarily transiting into Small Finance Banks (SFBs) initial requirement of net worth shall be at Rs. 100 crore, which will have to be increased to Rs. 200 crore within five years from the date of commencement of business. Incidentally, the net-worth of all SFBs currently in operation is in excess of Rs. 200 crore; 

(iv) SFBs will be given scheduled bank status immediately upon commencement of operations;

(v) SFBs will have general permission to open banking outlets from the date of commencement of operations; 

(vi) Payments Banks can apply for conversion into SFB after five years of operations, if they are otherwise eligible as per these guidelines.

[Press Release: 2019-2020/1356]




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