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RBI Increases the Minimum Capital Need for SFBs to Rs 200 Cr

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<p>On Monday, the Reserve Bank allowed Payments Bank to become an SFB and increased the minimum capital requirement for small financing banks to Rs 200 crore.</p>
<p><img decoding=”async” class=”alignnone wp-image-343698″ src=”https://www.theindiaprint.com/wp-content/uploads/2024/01/theindiaprint.com-rbi-increases-the-minimum-capital-need-for-sfbs-to-rs-200-cr-untitled-design-2023-.jpg” alt=”theindiaprint.com rbi increases the minimum capital need for sfbs to rs 200 cr untitled design 2023″ width=”1177″ height=”784″ title=”RBI Increases the Minimum Capital Need for SFBs to Rs 200 Cr 3″ srcset=”https://www.theindiaprint.com/wp-content/uploads/2024/01/theindiaprint.com-rbi-increases-the-minimum-capital-need-for-sfbs-to-rs-200-cr-untitled-design-2023-.jpg 510w, https://www.theindiaprint.com/wp-content/uploads/2024/01/theindiaprint.com-rbi-increases-the-minimum-capital-need-for-sfbs-to-rs-200-cr-untitled-design-2023–150×100.jpg 150w” sizes=”(max-width: 1177px) 100vw, 1177px” /></p>
<p>Coincidentally, the combined net value of all SFBs in existence at this time exceeds Rs 200 crore.</p>
<p>The Reserve Bank announced the updated guidelines, which state that in order for Primary (Urban) Co-operative Banks (UCBs) to willingly transition into SFBs, their net worth must first meet the threshold of Rs 100 crore and then rise to Rs 200 crore within five years of the date of business inception.</p>
<p>Payment banks that meet all other requirements and have been operating for five years may seek to become SFBs, according to the criteria.</p>
<p>According to regulatory rules on Payments Bank conversion to SFB, Fino Payments Bank has already filed for an SFB license, the bank stated in a statement.</p>
<p>According to the procedure, the regulator is reviewing the application and waiting for more feedback from the RBI, according to Fino.</p>
<p>“SBs will be given scheduled bank status immediately upon commencement of operations,” the letter said.</p>
<p>It said that as of the day of operations’ start, the banks would have broad authorization to establish banking locations.</p>
<p>On November 27, 2014, the Reserve Bank of India (RBI) last released rules for small finance bank licenses in the private sector.</p>
<p>As a result, it granted ten applicants permission in principle, and they have subsequently founded banks.</p>
<p>Today, the majority of these SFBs are traded on stock markets. The most recent to go public is ESAF Small Finance Bank, which is based in Kerala. The listing date was November of last year.</p>
<p>Basic banking services, deposit taking, and lending to underprivileged and unserved groups—small businesses, marginal and small farmers, micro and small enterprises, and unorganized sector entities—are anticipated to be provided by SFBs.</p>
<p>SFBs and Payments Banks vary in that the latter isn’t permitted to provide loans.</p>
<p>Payments Bank may help those without access to the official banking system by offering basic savings, deposit, payment, and remittance services.</p>
<p>The majority of the prudential standards that scheduled commercial banks are required to follow also apply to SFBs. For example, they must uphold the statutory liquidity ratio (SLR), which specifies the percentage of deposits to be invested in government securities, and the cash reserve ratio (CRR), which specifies the amount of deposits to be kept aside with the central bank, as required for commercial banks.</p>
<p>A little over 75% of the loans provided by small financing institutions will have to go to industries including low-income earners, small businesses, and farmers that are seen as belonging to the so-called priority sector.</p>
<p>Commercial banks are required to lend these industries forty percent of their net bank credit.</p>


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