The Reserve Bank of India (RBI) has given in-principle nod to 10 applicants to set up small finances banks.

The name of the entities that have been granted the licence include- Au Financiers, Capital Local Area Bank , Disha Microfin, Equitas Holdings, ESAF Microfinance and Investments, Janalakshmi Financial Services, RGVN (North East) Microfinance, Suryoday Micro Finance, Ujjivan Financial Services and Utkarsh Micro Finance.

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The small finance banks will mainly undertake basic banking operations of accepting deposits and lending to unserved and underserved sections such as small business units, small and marginal farmers, micro and small industries and unorganised sector entities.

Their maximum loan size and investment limit exposure to single and group obligators cannot exceed 10% and 15% of its capital funds, respectively.

In addition, a minimum of 50% of their loan portfolio has to include loans and advances of up to INR2.5m.

However, these banks cannot lend to big corporates and groups, open branches without prior nod from RBI for first five years, set up subsidiaries to undertake non-banking financial services activities, or be a business correspondent of any bank.

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According to a statement by the central bank, the in-principle approval will be valid for a period of 18 months to allow the applicants meet the requirements under the guidelines and fulfill other conditions as may be stipulated by the RBI.

"On being satisfied that the applicants have complied with the requisite conditions laid down by it as part of "in-principle" approval, the RBI would consider granting them a licence for commencement of banking business under Section 22(1) of the Banking Regulation Act, 1949, " the statement added.

The applicants will not be allowed to undertake any banking business until a regular licence has been issued.