The central bank of India has published the final guidelines for ‘on tap’ licensing of small finance banks (SFBs).
The move, subject to certain requirements, will enable NBFCs, payment banks and co-operative banks convert to SFBs.
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It comes nearly three months after the central bank released the draft guidelines for feedback from all stakeholders.
The latest guidelines by the Reserve Bank of India (RBI) revise its earlier directives that were issued in 2014.
Major changes from the original edition include the introduction of on-tap, i.e, ongoing licensing window.
The minimum paid-up voting equity capital / net worth requirement was fixed at INR2bn ($28.12m).
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By GlobalDataAlso, the Primary (Urban) Co-operative Banks (UCBs) can convert into SFBs with an initial capital requirement of INR1bn. However, the amount needs to be increased to INR2bn within five years of operations.
Furthermore, SFBs will receive scheduled bank status and can open branches following the commencement of operations.
The payment banks can also convert into SFB after completing five years of operations.
In a statement, RBI said that the move is aimed at improving financial inclusion in the country. It will also expand credit service availability to small business units, farmers and micro and small industries.
The central bank noted that it has issued in-principle approval to ten applicants since 2014. All of them have established banking operations.
