SMALL FINANCE BANKS

LIST OF ACTIVE SMALL FINANCE BANKS IN INDIA :

Presently Following Small Finance Banks have started operation .
( CLICK ON THE NAME OF THE BANK TO GO TO THEIR WEBSITE )

1. AU SMALL FINANCE BANK : Licence given by RBI to Au Financiers (India) Limited, Jaipur .

2. CAPITAL SMALL FINANCE BANK : ​ Licence given by RBI to Capital Local Area Bank Limited, Jalandhar

​3. SURYODAY SMALL FINANCE BANK : ​ Licence given by RBI to Suryoday Micro Finance Private Limited, Navi Mumbai

4. UJJIVAN SMALL FINANCE BANK : ​Licence given by RBI to Ujjivan Financial Services Private Limited, Bengaluru .

5. UTKARSH SMALL FINANCE BANK : ​​Licence given by RBI to Utkarsh Micro Finance Private Limited, Varanasi.

6 EQUITAS SMALL FINANCE BANK : ​​​Licence given by RBI to Equitas Holdings P Limited, Chennai

7 ESAF SMALL FINANCE BANK : ​Licence given by RBI to ESAF Microfinance and Investments Private Limited, Chennai .

​8 JANA SMALL FINANCE BANK : ​Licence given by RBI to Janalakshmi Financial Services Private Limited, Bengaluru

9 . FINCARE SMALL FINANCE BANK : ​Licence given by RBI to Disha Microfin Private Limited, Ahmedabad ​
( Now merged with AU Small Finance Bank )

10 : NORTH EAST SMALL FINANCE BANK : ​ ​Licence given by RBI to RGVN (North East) Microfinance Limited, Guwahati

​11. UNITY SMALL FINANCE BANK : Floated by the Centrum Group-BharatPe consortium

12. SHIVALIK SMALL FINANCE BANK : Transited from Shivalik Mercantile Co-operative Bank

WHAT IS A SMALL FINANCE BANK ?

Small finance banks are a type of niche banks in India. Banks with a small finance bank license can provide basic banking service of acceptance of deposits and lending. The aim behind these to provide financial inclusion sections of the economy not being served by other banks .

Basically Small Finance banks would help small business units, small and marginal farmers, micro and small industries and unorganised sector entities in India. On 16th September 2015 , Reserve Bank of India has given licence or in -principle approval to 10 entities for opening such banks out of the 72 applications received . According to a statement by RBI, the in-principle approval granted is valid for 18 months to enable the applicants to comply with the requirements under the Guidelines and fulfil other conditions as may be stipulated by them

The ten companies are

1. Au Financiers (India) Limited, Jaipur

2. Capital Local Area Bank Limited, Jalandhar

3. Disha Microfin Private Limited, Ahmedabad

4. Equitas Holdings P Limited, Chennai

5. ESAF Microfinance and Investments Private Limited, Chennai

6. Janalakshmi Financial Services Private Limited, Bengaluru

7. RGVN (North East) Microfinance Limited, Guwahati

8. Suryoday Micro Finance Private Limited, Navi Mumbai

9. Ujjivan Financial Services Private Limited, Bengaluru

10. Utkarsh Micro Finance Private Limited, Varanasi.

LICENCES FOR SMALL FINANCE BANKS :

Guidelines for ‘on tap’ Licensing of Small Finance Banks dated December 5, 2019

In " on-tap " licensing . an applicant can apply to RBI on any time for obtaining licence to operate a small finance bank . The applications will go through the following procedure before they get a licence by RBI :
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At the first stage, the applications will be screened by RBI to assess the eligibility of the applicants, vis-à-vis the criteria laid down in these guidelines. RBI may apply additional criteria to determine the suitability of applications, in addition to the ‘fit and proper’ criteria prescribed at paragraph 3 above. Thereafter, the applications will be referred to a Standing External Advisory Committee (SEAC) to be set up by RBI.

• The SEAC will comprise of eminent persons with experience in banking, financial sector and other relevant areas. The tenure of the SEAC will be for three years.

• The SEAC will set up its own procedures for screening the applications. The SEAC will meet periodically, as and when required. The Committee will reserve the right to call for more information as well as have discussions with any applicant/s and seek clarification on any issue as may be required by it. The Committee will submit its recommendations to RBI for consideration.

• The Internal Screening Committee (ISC), consisting of the Governor and the Deputy Governors will examine all the applications. The ISC will also deliberate on the rationale of the recommendations made by the SEAC and then submit its recommendations to the Committee of the Central Board (CCB) of RBI for the final decision to issue ‘in-principle approval’.

• The validity of the ‘in-principle approval’ issued by RBI will be 18 months from the date of granting ‘in-principle approval’ and would thereafter lapse automatically. Therefore, the -applicant will have to obtain the license within a period of 18 months of granting the ‘in-principle approval’.

• After issue of the ‘in-principle approval’ for setting up of a small finance bank, if any adverse features are noticed regarding the Promoters or the companies / entities with which the Promoters are associated and the group in which they have interest, the RBI may impose additional conditions and if warranted, may withdraw the ‘in-principle approval’.

• The names of applicants that are found suitable for grant of in-principle approval will also be placed on the RBI website.

• An applicant who has not been found suitable for issue of license will be advised of the Reserve Bank’s decision. Such applicants will not be eligible to make an application for a banking license for a period of three years from the date of that decision.

• Applicants aggrieved by the decision of the Committee of the Central Board can prefer an appeal against the decision to the Central Board of Directors, within one month from the date of receipt of communication from RBI relating to the application not being considered as at paragraph 16 (h) above.

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• Who can apply for SFB Licence ?
  
  1. Resident individuals/professionals (Indian citizens), singly or jointly, each having at least 10 years of experience in banking and finance at a senior level;
  2. Companies and Societies in the private sector, that are owned and controlled by residents (as defined in FEMA Regulations, as amended from time to time), and having successful track record of running their businesses for at least a period of five years, will be eligible as promoters to set up small finance banks.
  3. Existing Non-Banking Finance Companies (NBFCs), Micro Finance Institutions (MFIs), and Local Area Banks (LABs) in the private sector, that are controlled by residents , and having successful track record of running their businesses for at least a period of five years, can also opt for conversion into small finance banks
  
  Who are not eligible to apply ?
  
  1. Joint ventures by different promoter groups for the purpose of setting up small finance banks would not be permitted.
  
  2. Proposals from public sector entities and large industrial house / business groups, including from NBFCs promoted by them, autonomous boards / bodies set up under enactment of a State legislature, state financial corporations, subsidiaries of development financial institutions, will not be entertained. For the purpose of these guidelines, a Group with assets of Rs.5,000 crore or more with the non-financial business of the group accounting for 40 per cent or more in terms of total assets / gross income, will be treated as a large industrial house / business groups.

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• What business a SFB can do ?

• The small finance bank can undertake basic banking activities of acceptance of deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities. It can also undertake other non-risk sharing simple financial services activities, not requiring any commitment of own fund, such as distribution of mutual fund units, insurance products, pension products, etc. with the prior approval of the RBI and after complying with the requirements of the sectoral regulator for such products. The small finance bank can also become a Category II Authorised Dealer in foreign exchange business for its clients’ requirements.

• Minimum Capital required : The minimum paid-up voting equity capital for small finance banks shall be Rs.200 crore,

Small Finance Banks are licensed and regulated by Reserve Bank of India . The minimum capital requirements for such banks is Rs 100 crores . Promoter stake must be at 40 percent in first 5 years - Promoter stake to be brought down to 30 percent within 10 yrs, 26 percent in 12 years .Joint ventures are not permitted. Foreign share holding will be allowed in these banks as per the rules for FDI in private banks in India. Listing mandatory within 3 years of reaching Rs. 500 crore net worth .

Guidelines issued by RBI for operations of the banks are as follows :

1. 75 percent of Adjusted Net Bank Credit to be extended to priority sector
2. 50 percent of loan portfolio to constitute loans & advances of upto Rs 25 lakh
3. 25 percentage of branches must be in unbanked rural areas
4. Maximum loan size & investment limit to single obligor restricted to 10 percent of capital funds
5. Maximum loan size & investment limit to a group restricted to 10 percent of capital funds
6. CRR, SLR requirement as applicable to existing commercial banks from Day 1

The draft guidelines issued by Reserve Bank of India on Payment Banks is available on their website .
To reach the guidelines . CLICK HERE . Further RBI , on 06.07.2017 , has issued compendium of Guidelines to Small Finance Banks which can be accessed by CLICKING HERE