On January 20 2025, the Reserve Bank of India (RBI) formed a five-member Standing External Advisory Committee (SEAC)Â chaired by the former Deputy Governor of RBI, Mahesh Kumar (MK)Â Jain to evaluate the applications for Universal Banks (UBs) and Small Finance Banks (SFBs).
- The committee has a three-year tenure, supported by the Department of Regulation, RBI for secretarial assistance.
About Standing External Advisory Committee (SEAC)Â :
Members:
The other 4-members of the committee are Revathy Iyer, Director of Central Board of RBI; Parvathy V Sundaram, former Executive Director (ED) of RBI; Hemant G Contractor, former Managing Director (MD) of State Bank of India (SBI) and former Chairman of Pension Fund Regulatory and Development Authority (PFRDA) and NS Kannan, former MD & Chief Executive Officer (CEO) of ICICI Prudential Life Insurance Company Limited.
Key Points:
i.Under the licensing guidelines, the RBI will first assess the eligibility of applications for UBs and SFBs. After that, the committee made up of experts in banking, finance, and related fields, will evaluate the applications.
ii.The committee will not review applications from SFBs which have already applied for or intend to apply for a UB license, as their eligibility was assessed when they were initially granted the SFB license.
iii.Applicants under review:
- For UB license – Annapurna Finance Private Limited (AFPL) and AU Small Finance Bank Limited (AU SFB).
- For SFB license – Fino Payments Bank and VFS Capital Limited.
iv.The first SEAC, formed in March 2021, was chaired by Shyamala Gopinath, former Deputy Governor of RBI, for a three-year term.
Eligibility Criteria for Conversion into SFBs:
i.Existing Non-Banking Financial Companies (NBFCs), Local Area Banks (LABs), and Micro Finance Institutions (MFIs) owned by residents are eligible to apply for a license.
ii.The applicant must have a minimum of Rs 200 crore in paid-up capital
iii.The applicant must have a successful track record of at least 10 years
iv.The promoter must have at least 10 years of experience in the banking sector.
Eligibility Criteria for Conversion of SFBs into UBs:
i.SFBs must have a minimum net worth of Rs 1,000 crore, as per the audited figures at the end of the previous quarter.
ii.Interested SFBs must have scheduled status and a satisfactory performance record for at least 5 years.
iii.It must meet the prescribed Capital to Risk-Weighted Assets Ratio (CRAR) requirement of 15% for SFBs.
Note: Â CRAR is a measure of a bank’s capital relative to its risk-weighted assets.
iv.Gross non-performing assets (G-NPA) and net NPA (N-NPA) must be less than or equal to 3% and 1%, respectively in the past two Financial Years(FYs)
v.The bank’s shares should be listed on a recognized stock exchange.
