RBI allows ‘on tap’ Licensing of Small Finance Banks in the Private Sector

RBI allows ‘on tap’ Licensing of Small Finance Banks in the Private Sector

• The Reserve Bank of India has released the Guidelines for ‘on tap’ Licensing of Small Finance Banks in the Private Sector. On tap licensing means, that now one can apply to open a Small Finance Bank whenever he/she wishes to open. This is unlike the previous case where RBI has issued in-principle approval to ten applicants only, to open Small Finance Bank.

Here are some important points related to this: 

• The licensing window will be open on-tap;
• minimum paid-up voting equity capital / net worth requirement shall be ₹ 200 crore.
• for Primary (Urban) Co-operative Banks (UCBs), desirous of voluntarily transiting into Small Finance Banks (SFBs) initial requirement of net worth shall be at ₹ 100 crore, which will have to be increased to ₹ 200 crore within five years from the date of commencement of business.
• SFBs will be given scheduled bank status immediately upon commencement of operations
• Payments Banks can apply for conversion into SFB after five years of operations.

Points to remember:

1. minimum paid-up voting equity capital for Small Finance Bank?- Rs 200 crore
2. minimum paid up capital requirement for Primary (Urban) Co-operative Banks (UCBs) to become Small Finance Bank?- Rs 100 crore
3. Payments bank can convert into SFB after how many years of operation?- 5 years

Source: RBI