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Small Finance Banks

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Small Finance Banks

shape Introduction

Static GK is one of the important section in both Government Sector and Bank related Exams. In the static GK, Banking is one of the important section. The present article Small Finance Banks presents the important points related to Small Finance banks and features related to them. The article Small Finance Banks can help the students and aspirants to perform well in the exams like IBPS PO, SO, Clerk, SBI, RRB, etc.

shape SFB

Small Finance Banks – SFB:

Reserve Bank of India released the Guidelines for Licensing of Small Finance Banks (SFB) in the Private Sector.

Objectives:

  • provision of savings vehicles.

  • supply of credit to small business units

  • small and marginal farmers

  • micro and small industries

  • other unorganized sector entities, through high technology-low cost operations


Eligible promoters for Small Finance Banks:

  • Resident individuals/professionals with 10 years of experience in banking and finance.

  • companies and societies owned and controlled by residents will be eligible to set up small finance banks.

  • Existing Non-Banking Finance Companies (NBFCs), Micro Finance Institutions (MFIs), and Local Area Banks (LABs) that are owned and controlled by residents can also opt for conversion into small finance banks.

  • Promoter/promoter groups should be fit and proper with a sound track record of professional experience or of running their businesses for at least a period of five years in order to be eligible to promote small finance banks.


Scope of activities:

  • It shall primarily undertake basic banking activities of acceptance of deposits and lending to un served and under served sections including small business units, small and marginal farmers, micro and small industries and unorganized sector entities.

  • There will not be any restriction in the area of operations of small finance banks.


Capital requirement & Promoter’s Contribution:

  • The minimum paid-up equity capital for small finance banks shall be Rs. 100 crores.

  • The promoter’s minimum initial contribution to the paid-up equity capital of such small finance bank shall at least be 40% and gradually brought down to 26% within 12 years from the date of commencement of business of the bank.


Prudential norms:

  • SFB will be subject to all prudential norms and regulations of RBI as applicable to existing commercial banks including requirement of maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).

  • SFB will be required to extend 75% of its Adjusted Net Bank Credit (ANBC) to the sectors eligible for classification as priority sector lending (PSL) by the Reserve Bank

  • At least 50% of its loan portfolio should constitute loans and advances of up-to Rs. 25 lakh.


In-principle approval :

RBI decided to grant In-principle approval to the following 10 applicants to set up small finance banks.

  • Au Financiers (India) Ltd., Jaipur

  • Capital Local Area Bank Ltd., Jalandhar

  • Disha Microfin Private Ltd., Ahmedabad

  • Equitas Holdings P Limited, Chennai

  • ESAF Micro finance and Investments Private Ltd., Chennai

  • Janalakshmi Financial Services Private Limited, Bengaluru

  • RGVN (North East) Micro finance Limited, Guwahati

  • Suryoday Micro Finance Private Ltd., Navi Mumbai

  • Ujjivan Financial Services Private Ltd., Bengaluru

  • Utkarsh Micro Finance Private Ltd., Varanasi


Head Office of Small Finance Banks:

  • Au Financiers (India) Ltd., Jaipur

  • Capital Local Area Bank Ltd., Jalandhar

  • Disha Microfin Private Ltd., Ahmedabad

  • Equitas Holdings P Limited, Chennai

  • ESAF Micro finance & Investments Private Ltd.,Registered Office-Chennai, Corporate Office-Thrissur (Kerala)

  • Janalakshmi Financial Services Private Limited, Bengaluru

  • RGVN (North East) Micro finance Limited, Guwahati

  • Suryoday Micro Finance Private Ltd., Navi Mumbai

  • Ujjivan Financial Services Private Ltd., Bengaluru

  • Utkarsh Micro Finance Private Ltd., Varanas


First SFB Logo :