Context: The Reserve Bank of India (RBI) on April 26th invited applications from small finance banks meeting specified criteria for becoming regular or universal banks.
Small Finance Banks:
| Aim | Provision of savings vehicles primarily to unserved and underserved sections of the population. Supply of credit to small business units; small and marginal farmers; micro and small industries; and other unorganized sector entities, through high technology-low cost operations. |
| Minimum Paid-up capital | 100 crores |
| Regulations | Subject to all prudential norms and regulations of RBI as applicable to other SCBs(CRR, SLR and CRAR etc.). |
| Priority Sector Lending targets | 75% |
| Conditions on Loans | · At least 50% of its loan portfolio should constitute loans and advances of up to Rs.25 lakh E.g., Suryodaya small finance bank, Utkarsh SFB etc. SFBs are required to open at least 25% of their total branches in unbanked rural areas. |
The eligibility criteria for an SFB to transition into a Universal bank will now be as follows:
- scheduled status with a satisfactory track record of performance for a minimum period of five years;
- shares of the bank should have been listed on a recognized stock exchange;
- having a minimum net worth of ₹1,000 crore as at the end of the previous quarter (audited);
- meeting the prescribed CRAR requirements for SFBs;
- having a net profit in the last two financial years; and
- having GNPA and NNPA of less than or equal to 3 percent and 1 percent respectively in the last two financial years.