SFBS should be worth `1,000 cr to become universal banks, says RBI

THE RESERVE Bank of India (RBI) has said small finance banks (SFBS) should have a minimum net worth of Rs 1,000 crore to become universal banks in accordance with the on-tap licensing norms.

According to the central bank, SFBS aspiring to become a universal bank need to have scheduled status with a satisfactory track record of performance for a minimum period of five years. Also, the shares of the bank should have been listed on a recognised stock exchange, the RBI said in a circular.

Further, these SFBS also need to have a net profit in the last two financial years besides having gross non-performing assets (GNPA) and net non-performing assets (NNPA) of less than or equal to three per cent and one per cent, respectively in the last two financial years, the RBI said.

On April 12, the RBI rejected applications received from Dvara Kshetriya Gramin Financial Services Pvt Ltd and Tally Solutions Pvt Ltd to start SFBS in the private sector. The two entities had applied to the RBI for setting up a SFB in 2021 under the guidelines for on-tap licensing.

The RBI circular said there is no mandatory requirement for an eligible SFB to have an identified promoter. However, the existing promoters of the eligible SFB, if any, should continue as the promoters on transition to a universal bank. “Addition of new promoters or change in promoters will not be permitted for an eligible SFB while transitioning to the universal bank,” it said. There should be no new mandatory lock-in requirement of minimum shareholding for existing promoters in the transitioned universal bank.

“There should be no change to the promoter shareholding dilution plan already approved by the Reserve Bank,” it said.

“The eligible SFBS having diversified loan portfolio will be preferred,” the RBI said.