RBI releases Name of Applicant under the Guidelines for ‘on tap’ Licensing of Small Finance Banks in the Private Sector
FinTech BizNews Service
Mumbai, 1 January, 2025: During the quarter ended December 31, 2024, the Reserve Bank of India has received one application under the Guidelines for ‘on tap’ Licensing of Small Finance Banks in the Private Sector dated December 05, 2019 from VFS Capital Limited.
VFS Capital, formerly known as Village Financial Services is spread over 283 branches across 15 states. It is Eastern India’s oldest microfinance entity. For the past 40 years, it has been striving to change the lives of people at the bottom of the pyramid — not by lending money alone but by handholding them into their entrepreneurial journey. The first MFI in the east to have become an NBFC, it has nearly half a million borrowers across over 22,021 villages in 15 states.
The Reserve Bank of India had released on Dec 05, 2019 on its website, “Guidelines for ‘on tap’ Licensing of Small Finance Banks in the Private Sector”.
Major changes from the earlier Guidelines on Small Finance Banks dated November 27, 2014, were (i) The licensing window will be open on-tap; (ii) minimum paid-up voting equity capital / net worth requirement shall be Rs 200 crore; (iii) for Primary (Urban) Co-operative Banks (UCBs), desirous of voluntarily transiting into Small Finance Banks (SFBs) initial requirement of net worth shall be at Rs 100 crore, which will have to be increased to Rs 200 crore within five years from the date of commencement of business. Incidentally, the net-worth of all SFBs currently in operation is in excess of Rs 200 crore; (iv) SFBs will be given scheduled bank status immediately upon commencement of operations; (v) SFBs will have general permission to open banking outlets from the date of commencement of operations; (vi) Payments Banks can apply for conversion into SFB after five years of operations, if they are otherwise eligible as per these guidelines.
Background
It may be recalled that the Reserve Bank of India (RBI) had last issued guidelines for licensing of Small Finance Banks in the private sector on November 27, 2014. Consequently, the Reserve Bank issued in-principle approval to ten applicants and they have since established the banks. It was mentioned in the guidelines that after gaining experience in dealing with these banks, RBI would consider receiving the applications on a continuous basis. In the Second Bi-monthly Monetary Policy Statement, 2019-20 dated June 06, 2019, it was announced that the Draft Guidelines for ‘on tap’ Licensing of such banks will be issued. Accordingly, the draft guidelines were published on the RBI website on September 13, 2019 inviting comments from the stakeholders and members of the public. Taking into consideration the responses received, the final guidelines have now been issued.
