Opportunity for small finance banks to become universal banks in the country, RBI invites applications

Small Finance Bank will become regular bank: RBI has invited applications from small finance banks to join the list of universal banks. At present there are more than 10 small finance banks operating in the country. As many of these banks grow in market size, they are working towards achieving universal bank status, i.e. regular bank status. For which the Reserve Bank has imposed many conditions like the condition of the bank, profits and listing in the market.

The Reserve Bank of India has issued some conditions for small finance banks seeking Universal Bank i.e. Regular Bank status. Under which small finance banks have also applied.

Conditions for Universal Bank Lien

As per RBI conditions, to avail the benefit of Universal Bank Lien, the total assets of a small finance bank at the end of any quarter should be at least Rs. Should be 1000 crores. Also the capital adequacy ratio should be 15 percent. Also, there should be a strong track record of at least five years. Gross NPA should be 3 per cent or less and net NPA should be 1 per cent or less with profits being recorded in at least 2 financial years.

Lien of listed small finance bank will also have to be imposed. Additionally, if there is a promoter of the Small Finance Bank at the time of applying for LION, he/she will also act as a promoter while transferring from Small Finance Bank to Universal Bank.

Benefits of Universal Bank

After several meetings with the Reserve Bank, an appeal was made by the Presidents of Small Finance Banks to grant them Universal Bank status. The size of many small finance banks is increasing in the country. However, eligibility for Universal Bank has also increased. Small finance banks have limited limitations including loan allocation, loan size, target customer. Having a universal bank provides relief from these limitations.

These small finance banks are working

AU Small Finance Bank, Equitas Small Finance, Ujjivan Small Finance Bank, Equitas Small Finance, Suryoday Small Finance Bank, Fincare Small Finance Bank, Fino Small Finance Bank, Utkarsh Small Finance Bank, ESAF Small Finance Bank…