RBI framework for Voluntary transition of Small Finance Banks to Universal Banks

RBI vide circular dated April 26, 2024 has issued framework for Voluntary transition of Small Finance Banks to Universal Banks. With the objective of bringing better clarity, the eligibility criteria for an SFB to transition into a Universal bank will now be as follows:

1. Scheduled status with a satisfactory track record of performance for a minimum period of five years;
2. Shares of the bank should have been listed on a recognised stock exchange;
3. Having a minimum net worth of ₹1,000 crore as at the end of the previous quarter (audited);
4. Meeting the prescribed CRAR requirements for SFBs;
5. Having a net profit in the last two financial years; and
6. Having GNPA and NNPA of less than or equal to 3 percent and 1 percent respectively in the last two financial years.

The eligible SFB shall be required to furnish a detailed rationale for such transition. The application for transition from SFB to Universal Bank shall be assessed in accordance with the Guidelines for ‘on tap’ Licensing of Universal Banks in the Private Sector dated August 1, 2016, as applicable, and Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions, 2023 dated January 16, 2023, as amended from time to time. Further, on transition the bank will be subjected to all the norms including NOFHC structure (as applicable) as per the said Guidelines.

The eligible SFB may submit its application for transition to Universal Bank, in the prescribed form (Form III) in terms of Rule 11 of the Banking Regulation (Companies) Rules, 1949, along with other requisite documents, to Department of Regulation, Reserve Bank of India, Central Office, 12th Floor, Central Office Building, Shahid Bhagat Singh Road, Mumbai – 400001.