The Reserve Bank of India (RBI) today granted an in-principle nod to 10 applicants for small finance banks. According to a statement by the central bank, the in-principle approval granted will be valid for 18 months to enable the applicants to comply with the requirements under the Guidelines and fulfil 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," adds the statement. According to the in-principle nod given by the central bank, the applicants cannot undertake any banking business until a regular licence is issued. A small finance bank, according to RBI, should have 75 percent of its adjusted net bank credit to be extended to priority sector and it should have atleast 25 branches in unbanked rural areas. A total of 72 players had applied for the small finance bank licence and three different committees contributed to the final decision. Here are the names of selected applicants:
1. Au Financiers (India) Limited, Jaipur 2. Capital Local Area Bank Limited, Jalandhar 3. Disha Microfin Private Limited, Ahmedabad 4. Equitas Holdings P Limited, Chennai 5. ESAF Microfinance and Investments Private Limited, Chennai 6. Janalakshmi Financial Services Private Limited, Bengaluru 7. RGVN (North East) Microfinance Limited, Guwahati 8. Suryoday Micro Finance Private Limited, Navi Mumbai 9. Ujjivan Financial Services Private Limited, Bengaluru 10.Utkarsh Micro Finance Private Limited, Varanasi. Samit Ghosh, MD and CEO, Ujjivan Financial Services Private Limited, says the first obstacle for the company will be to convert its ownership structure from foreign to domestic. The micro-finance company has Rs 3300 crore assets under management (AUM) and caters to 24 states and union Territories. BS Radhakrishnan of Janalakshmi FInancial Services says the RBI's intention behind granting approvals to both small banks and payment banks (in the recent past) is to create competition so that customers can get a variety of choices.
"The noteworthy part, though, he adds is that payment banks can only accept deposits, unlike us who can lend too. So the ability of small banks to look at both sides of the balancesheet will help the company," he explains. Guidelines to be met by small finance banks: - 75 percent of Adjusted Net Bank Credit to be extended to priority sector - 50 percent of loan portfolio to constitute loans & advances of upto Rs 25 lakh - 25 branches must be in unbanked rural areas - Maximum loan size & investment limit to single obligor restricted to 10 percent of capital funds - Maximum loan size & investment limit to a group restricted to 10 percent of capital funds - Require minimum paid up equity capital of Rs 100 crore. - Promoter stake must be at 40 percent in first 5 years - Promoter stake to be brought down to 30 percent within 10 yrs, 26 percent in 12 years - Listing mandatory within 3 years of reaching Rs. 500 crore net worth - Maximum foreign shareholding of 74 percent allowed
