The country may soon have many more banks. On Friday, the Reserve Bank of India (RBI) invited applications from many small finance banks. If no problem is found, RBI can give them the status of regular or universal banks. There are about a dozen small finance banks in the country. These include names like Au Small Finance Bank, Equitas Small Finance Bank, and Ujjivan Small Finance Bank.
Net Worth Of Small Bank Should Be Rs 1000 Crore
In November 2014, RBI issued guidelines for running small finance banks in the private sector. According to them, to attain the status of a Regular or Universal Bank, a small bank’s net worth should be Rs 1000 crore or more at the end of the previous quarter. Besides, the bank’s shares should also be listed on the stock exchange. Small banks should have made a profit in the last two financial years.
Apart from this, its gross NPA should be less than 3 per cent, and net NPA should be less than 1 per cent in the last two financial years. Besides, it should also have a capital-to-risk-weighted assets ratio and a satisfactory track record of 5 years.
Reserve Bank Had Issued Rules In December 2019
The central bank has said that although there are no special rules for the promoters of small finance banks. But, even after the formation of Universal Bank, the promoters should remain the same. During the changeover, change of promoters is not allowed. However, it has been said in the RBI circular that during the formation of a universal bank, no lock-in period has been kept regarding the minimum shareholding of the existing shareholders. The Reserve Bank told in December 2019 how a small finance bank can be converted into a universal or regular bank.
Bandhan Bank and IDFC First Bank Are The Newest
In 2015, RBI allowed Bandhan Bank and IDFC First Bank to become universal or regular banks. Since then, no new bank has been approved.
