Reserve Bank of India (RBI) granted “in principle approval” to 10 companies to set up small finance banks to provide access to financial services in rural and semi-urban areas.
(In principle approval meaning – Application has meet the conditions but it’s not the confirmation that application will be successful)
Aim: To offer basic banking services of accepting deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries, and entities in the unorganized sectors
A total of 72 players had applied for the small finance bank licence and the applications were reviewed by a 3 committees.
Key guidelines to be met by small finance banks
In-principle approval granted will be valid for 18 months to enable the applicants to comply with the requirements under the Guidelines and fulfill other conditions as stipulated by the RBI under Section 22(1) of the Banking Regulation Act, 1949.
– 25 branches must be in unbanked rural areas.
– Require minimum paid up equity capital of Rs 100 crore.
– 50 percent of loan portfolio to constitute loans & advances of up to Rs 25 lakh.
– Listing mandatory within 3 years of reaching Rs. 500 crore net worth.
– Maximum foreign shareholding of 74% allowed.
– Promoter stake must be at 40% in first 5 years – their stake to be brought down to 30% within 10 years, 26% in 12 years.
– Maximum loan size & investment limit to single obligor restricted to 10% of capital funds.
- Au Financiers (India) Limited, Jaipur
- Capital Local Area Bank Limited, Jalandhar
- Disha Microfin Private Limited, Ahmedabad
- Equitas Holdings P Limited, Chennai
- ESAF Microfinance and Investments Private Limited, Chennai
- Janalakshmi Financial Services Private Limited, Bengaluru
- RGVN (North East) Microfinance Limited, Guwahati
- Suryoday Micro Finance Private Limited, Navi Mumbai
- Ujjivan Financial Services Private Limited, Bengaluru
- Utkarsh Micro Finance Private Limited, Varanasi.
According to the in-principle nod given by the central bank, the applicants cannot undertake any banking business until a regular licence is issued.