Press Trust of India
Mumbai, Sept 16: 10 entities, including Ujjivan Financial Services and Equitas Holdings, Wednesday got RBI’s approval to set up Small Finance Banks to provide basic banking services to small farmers and micro industries. Other entities to get the Reserve Bank’s nod are Au Financiers (Jaipur), Capital Local Area Bank (Jalandhar), Disha Microfin (Ahmedabad), ESAF Microfinance (Chennai), Janalakshmi Financial (Bengaluru), RGVN (North East) Microfinance (Guwahati), Suryoday Micro Finance (Mumbai) and Utkarsh Micro Finance (Varanasi).
The “in-principle” approval will be valid for 18 months to enable these entities comply with the guidelines on Small Finance Banks, RBI said in a statement. Last month, the central bank had granted approval to 11 entities for launching Payments Banks. Besides, two new entities– IDFC and Bandhan — have been given full-fledged banking licence. The Small Finance Banks can provide basic banking services like accepting deposits and lending to the unbanked sections such as small farmers, micro business enterprises, micro and small industries and unorganised sector entities.
“Going forward, the Reserve Bank intends to use the learning from this licensing round to appropriately revise the guidelines and move to giving licences more regularly, that is, virtually on tap,” RBI said. The central bank had received 72 applications for setting up small finance bank licences. With an objective to promote financial inclusion, these banks would focus on small borrowers, low-ticket savings and serve rural areas. As per RBI norms, a Small Finance Bank will primarily undertake basic banking activities of acceptance of deposits and lending to unserved and under-served sections, including small business units, small and marginal farmers, micro and small industries and unorganised sector entities.
Such entities can operate across the country as there is no area of restriction. However, at least 50 per cent of its loan portfolio should constitute loans and advances of up to Rs 25 lakh. The Small Finance Bank 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). These banks would not enjoy any forbearance from complying with the statutory provisions. They have to follow the norms for scheduled commercial banks. As far as foreign shareholding is concerned, this would be as per the Foreign Direct Investment (FDI) policy for private sector banks as amended from time to time. Currently, private banks are allowed foreign investment of 74 per cent.
As per the norms, the operations of the bank should be fully networked and technology driven from the beginning, conforming to generally accepted standards and norms. The bank should have a high powered Customer Grievances Cell too. In the Union Budget 2014-2015, Finance Minister Arun Jaitley had said, “After making suitable changes to current framework, a structure will be put in place for continuous authorization of universal banks in the private sector in the current financial year.
