The Reserve Bank of India (RBI), on Thursday, issued final guidelines for small finance banks and payments banks, paving the way for mobile firms and supermarket chains, among others, to enter the banking arena to cater to individuals and small businesses.
The minimum paid-up capital for these banks will be Rs.100 crore each.
The foreign shareholding will be in line with the foreign direct investment (FDI) policy for private sector banks.
Applications will be accepted till the close of business as on January 16, 2015.
According to the RBI, the objective of setting up of small finance banks will be to further financial inclusion by provision of savings vehicles and supply of credit to small business units, small and marginal farmers, micro and small industries and other unorganised sector entities, through high technology-low cost operations.
Individuals/professionals with 10 years of experience in banking and finance and companies and societies will be eligible to set up small finance banks.
Existing non-banking finance companies (NBFCs), micro finance institutions (MFIs), and local area banks (LABs) can also opt for conversion into small finance banks.
The small finance banks will primarily undertake basic banking activities of acceptance of deposits and lending to un-served and underserved sections, including small business units, small and marginal farmers, micro and small industries and unorganised sector entities.
However, RBI said, “There will not be any restriction in the area of operations of small finance banks.”
The small finance banks will be subject to all prudential norms and regulations of RBI as applicable to existing commercial banks, including requirement of maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). “No forbearance will be provided for complying with the statutory provisions,” the apex bank said.
The small finance banks will be required to extend 75 per cent of its adjusted net bank credit (ANBC) to the sectors eligible for classification as priority sector lending (PSL) by the RBI.
“At least 50 per cent of its loan portfolio should constitute loans and advances of up to Rs. 25 lakh.”
RBI also said that if the small finance bank aspired to transit into a universal bank, such transition would not be automatic, but would be subject to fulfilling minimum paid-up capital / net worth requirement as applicable to universal banks, among others. The RBI said that the objectives of setting up of payments banks will be to further financial inclusion by providing small savings accounts and payments/remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities and other users.
Existing non-bank pre-paid payment instrument (PPI) issuers and other entities such as individuals / professionals, non-banking finance companies (NBFCs), corporate business correspondents(BCs), mobile telephone companies, super-market chains, companies, real sector cooperatives and public sector entities can apply to set up payments banks.
A promoter/promoter group can have a joint venture with an existing scheduled commercial bank to set up a payments banks.
However, scheduled commercial bank can take equity stake in a payments bank to the extent permitted under Section 19 (2) of the Banking Regulation Act, 1949, said RBI.
On acceptance of demand deposits, the RBI said that payments bank would initially be restricted to holding a maximum balance of Rs. 100,000 per individual customer. Payments banks, however, cannot issue credit cards. These banks would be allowed to distribute non-risk sharing simple financial products like mutual fund unitsdertake lending activities,” said RBI.
It also stated that apart from amounts maintained as Cash Reserve Ratio (CRR), it will be required to invest minimum 75 per cent of its “demand deposit balances” in Statutory Liquidity Ratio (SLR).
