Small finance bank
Small finance banks are a type of niche banks in India. Banks with a small finance bank license can provide basic banking service of acceptance of deposits and lending. The aim behind these to provide financial inclusion to sections of the economy not being served by other banks, such as small business units, small and marginal farmers, micro and small industries and unorganised sector entities.
Summary of regulations
- · Existing non-banking financial companies (NBFC), microfinance institutions (MFI) and local area banks (LAB) can apply to become small finance banks.
- · They can be promoted either by individuals, corporate, trusts or societies.
- · They are established as public limited companies in the private sector under the Companies Act, 1956.
- · They are governed by the provisions of Reserve Bank of India Act, 1934, Banking Regulation Act, 1949 and other relevant statutes.
- · The banks will not be restricted to any region.
- · They were set up with the twin objectives of providing an institutional mechanism for promoting rural and semi urban savings and for providing credit for viable economic activities in the local areas.
- · 75% of its net credits should be in priority sector lending and 50% of the loans in its portfolio must in ₹25 lakh (US$38,000) range.[2]
- · The firms must have a capital of at least ₹100 crore (US$15 million).
- · The promoters should have 10 years' experience in banking and finance. The promoters stake in the paid-up equity capital will be at least 40% initially but must be brought down to 26% in 12 years. Joint ventures are not permitted. Foreign share holding will be allowed in these banks as per the rules for FDI in private banks in India.
- · At net worth of ₹500 crore (US$77 million), listing will be mandatory within three years. Small finance banks having net worth of below ₹500 crore (US$77 million) could also get their shares listed voluntarily.
List of Small Finance Banks in India
