Final guidelines for on-tap licensing of SFBs announced

MUMBAI: The Reserve Bank of India (RBI) on Thursday (December 5) announced the final guidelines for the ‘on-tap’ licensing of Small Finance Banks (SFBs) thus opening the window for applicants to approach the regulator for licence..

RBI has kept Rs200 crore as the minimum paid-up voting equity capital or net worth requirement for the licence, up from the earlier Rs100 crore.

For primary urban cooperative banks (UCBs) that intend to convert themselves into SFB, RBI said that the initial requirement of net worth will be at Rs100 crore, which will have to be raised to Rs 200 crore within five years from the date of commencement of operation.

Payments Banks have also been allowed to apply for conversion into SFBs after five years of operations, if they meet the other eligibility requirements.

Investors, other than promoters, will not be allowed to hold more than 10 per cent stake in an SFB. However, in case of non-banking finance companies (NBFCs), micro-finance institutions (MFIs) and local area banks, where non-promoters hold more than 10 per cent limit, RBI may consider allowing three years to dilute their stake to the prescribed levels.

RBI also said that SFBs will be given scheduled bank status immediately and will be allowed to open banking outlets from the date of commencement of operations.

RBI will appoint a Standing External Advisory Committee (SEAC) with a three-year tenure to process applications. Successful applicants will be granted an ‘in-principle’ approval, which will be valid for 18 months.

The listing of SFB will be mandatory within three years after it reaches a net worth value of Rs500 crore for the first time.

The central bank had earlier issued guidelines for licensing of SFBs in November 2014 leading to granting of in-principle approval to 10 applicants. In September 2019, the draft norms were issued for ‘on-tap’ licensing of SFBs.

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