The Reserve Bank of India in its Notification dated 5th December 2019 has issued guidelines for ‘on tap’ licensing of small finance banks in the private sector. The move comes after a review of the performance of the existing small finance banks(SFBs), which were granted in-principle approval in 2014.
RBI had earlier issued Guidelines for licensing of Small Finance Banks in the private sector on November 27, 2014. It was notified in these guidelines that after gaining experience in dealing with these banks, the Reserve Bank would consider receiving the applications on a continuous basis for ‘on tap’ licensing of SFBs.
The major amendments from the earlier Guidelines are as follows:-
- The licensing window will be open on-tap
- The minimum paid-up voting equity capital or net worth requirement has been set at Rs 200 crore, up from Rs 100 crore as set earlier
- Primary (urban) co-operative banks (UCBs), which wish to become SFBs, the initial requirement of net worth will be ₹100 crores, which will have to be increased to ₹200 crores within five years from the date of commencement of business.
- SFBs will be given scheduled bank status immediately and will be allowed to open banking outlets from the date of commencement of operations.
- Payments Banks have also been allowed to apply for conversion into SFB after five years of operations, if they meet other eligibility norms.
click here to read the Notification.
