RBI asks applications from small finance banks to become regular banks

Small Finance Banks: The country may soon get many more banks. Reserve Bank of India (RBI) on Friday has invited applications in this regard from many small finance banks. If no problem is found then they can be given the status of regular or universal banks by RBI. At present there are about a dozen small finance banks in the country. These include names like Au Small Finance Bank, Equitas Small Finance Bank and Ujjivan Small Finance Bank.

Net worth of small bank should be Rs 1000 crore.

In November 2014, RBI had issued guidelines for running small finance banks in the private sector. According to them, to attain the status of Regular or Universal Bank, the net worth of a small bank should be Rs 1000 crore or more at the end of the previous quarter. Besides, the shares of the bank should also be listed on the stock exchange. Small bank should have made profit in the last two financial years. Apart from this, its gross NPA should be less than 3 percent and net NPA should be less than 1 percent in the last two financial years. Besides, it should also have capital to risk weighted assets ratio and a satisfactory track record of 5 years.

Reserve Bank had issued rules in December, 2019

The Central Bank has said that although there are no special rules for the promoters of Small Finance Bank. But, even after formation of Universal Bank, the promoters should remain the same. During the changeover, change of promoters is not allowed. However, it has been said in the RBI circular that during the formation of a universal bank, no lock-in period has been kept regarding the minimum shareholding of the existing shareholders. The Reserve Bank had told in December 2019 how a small finance bank can be converted into a universal or regular bank.

Bandhan Bank and IDFC First Bank are the newest

The last time RBI approved Bandhan Bank (Bandhan Bank) and IDFC First Bank (IDFC First Bank) was allowed to become a universal or regular bank. After this, no new bank has been approved yet.

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