RBI Unveils Guidelines on Small Finance Banks

The Reserve Bank of India (RBI) has released ‘Guidelines for ‘on tap’ Licensing of Small Finance Banks (SFB) in the Private Sector’. With these new guidelines, RBI has introduced major changes from earlier Guidelines issued by the apex bank on 27 November 2014, for licensing of Small Finance Banks in private sector.

New Guidelines on SFBs

  1. Licensing window will be open ‘on-tap’. The on-tap facility allows RBI to accept applications and grant licence for banks throughout the year. This policy also allows aspirants to apply for universal bank licence any time, subjected to fulfilling certain conditions. As of now, the RBI has issued licences to 10 SFBs.
  2. Minimum paid-up voting equity capital/ net worth requirement shall be Rs.200 crore.
  3. For Primary (Urban) Co-operative Banks (UCBs), aspiring to voluntarily transit into SFBs, initial requirement of net worth shall be at Rs.100 crores that will have to be increased to Rs.200 crores within 5 years from date of commencement of business. However, the net-worth of all SFBs currently in operation is in excess of Rs.200 crore.
  4. SFBs will have general permission to open banking outlets from date of commencement of operations.
  5. SFBs will be given scheduled bank status immediately upon commencement of operations.
  6. Payments Banks like Paytm an IndiaPost and Fino can apply for conversion into SFB after 5 years of operations, if they are otherwise eligible as per these guidelines.

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