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RBI proposes Rs 200 crore minimum capital for SFB under 'on tap' licence regime

RBI proposes Rs 200 crore minimum capital for SFB under on tap licence regime

Mumbai: The Reserve Bank of India (RBI) on Friday proposed a minimum equity capital of Rs 200 crore to set up a small finance bank (SFB) under the 'on tap' licence regime to expand the banking services through high technology-low cost operations.

Releasing the draft guidelines for 'on tap' licensing of SFBs in the private sector, the RBI said existing non-banking financial companies, micro finance institutions and local area banks in the private sector, which are controlled by residents, can opt for conversion into small finance banks. It further said proposals from public sector entities and large industrial house/business groups, and autonomous boards/bodies will not be entertained. A small finance bank is primarily set up to undertake basic banking activities of acceptance of deposits and lending to unserved and underserved sections, including small business units, small and marginal farmers, micro and small industries and unorganised sector entities. The objectives of setting up of SBFs is to further financial inclusion and supply of credit "through high technology-low cost operations", the draft said.

"The minimum paid-up voting equity capital for small finance banks shall be Rs 200 crore, except for such small finance banks which are converted from UCBs...," said the draft on which the central bank has sought comments from the stakeholders by October 12.

Further, in view of the inherent risk of an SFB, it shall be required to maintain a minimum capital adequacy ratio of 15 per cent of its risk weighted assets on a continuous basis. It further said the promoters should hold a minimum of 40 per cent of the paid-up voting equity capital of the bank, which would remain locked in for five years from the date of commencement of the business.



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