Small Finance Bank: Check Complete Details Here

Understanding Small Finance Banks (SFBs)

• Small Finance Banks are niche banks that focus and serve the needs of a certain demographic segment of the population.
• They are set up to enhance financial inclusion.
• The idea of Small Finance Bank was framed on the recommendation of NachiketMor Committee on financial inclusion.
• The main customers of small finance banks include micro industries, small and marginal farmers, unorganized sector entities and small business units.
• They are licensed under Section 22 of the Banking Regulation Act, 1949 and are governed by the provisions of RBI Act, 1934 and FEMA.
• Objective: The two main aim of small finance bank:
  • Provision of Saving Vehicles
  • 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.

Criteria for setting up SFBs

• Minimum Paid-up equity capital: Rs 200 crore 
• Eligibility Criteria: Individuals/ professionals with 10 years of experience in finance, Non-Banking Financial Companies (NBFCs), micro finance companies, local area banks are eligible to establish Small Finance Banks.
• The initial contribution of promoter to the paid-up equity capital of a small finance bank shall be at least 40% and gradually brought down to 26% within 12 years from the date of commencement of business of the bank.
• Foreign Shareholdings: The small finance bank’s foreign shareholding would be as per the Foreign Direct Investment (FDI) policy for private sector banks subject to amendment from time to time.
• Adjusted Net Bank Credit: The small finance banks will have to extend 75% of its Adjusted Net Bank Credit (ANBC) to the sectors eligible for classification as priority sector lending (PSL) by the Reserve Bank.
• CRR and SLR: Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) as per RBI norms is to be maintained.
• At least 50 per cent of its loan portfolio should constitute loans and advances of upto Rs 25 lakh.

Functions

Here are some of the functions that a Small Finance Bank performs:

• Take small deposits and disburse loans.
• Distribute mutual funds, insurance products and other simple third-party financial products.
• Lend 75% of their total adjusted net bank credit to priority sector.
• Maximum loan size would be 10% of capital funds to single borrower, 15% to a group.
• Minimum 50% of loans should be up to 25 lakhs.

 

Background

Finance Minister Arun Jaitley announced in the Union Budget for 2014-2015 that RBI will create a guideline for licensing small banks and payment banks. These banks will provide basic banking facilities to the small businesses, the unorganized sector, low-income households, farmers, and the migrant workforce in both urban and rural areas.

On 27^th November 2014, the Reserve Bank of India (RBI) released the guidelines for Licensing of Small & Payments Banks. RBI received 72 applications for small finance banks and 41 applications for payments banks till 3rd February 2015, which included some of India’s biggest companies. The idea for these two categories was first mooted by the Nachiket Mor Committee on Financial Inclusion.

Committee on Small Banks – The applications were analyzed and evaluated by an External Advisory Committee (EAC). The EAC for small banks was chaired by Usha Thorat, former deputy governor, RBI. 

Committee on Payment Banks – These applications were analyzed and evaluated by an External Advisory Committee (EAC). The EAC Committee for Payment Banks was chaired by Dr. Nachiket Mor, Director, Central Board of the Reserve Bank of India.

 

List of Small Finance Banks

1. Capital Small Finance Bank (India’s first small finance bank)

• Capital Small Finance Bank (formerly Capital Local Area Bank Ltd) is India’s first small finance bank started its banking operations in April 2016 in Jalandhar, Punjab.
• The bank got the license of Small Finance Bank from Reserve Bank of India (RBI) in March 2016.

• Managing Director of Capital Small Finance Bank: Sarvjit Singh Samra
• Headquarter of Capital Small Finance Bank: Jalandhar, Punjab.
• Tagline: Vishwas Se Vikas Tak

2. Equitas Small Finance Bank (formerly Equitas Holdings P Limited) started its banking operations with 3 branches in Chennai in September 2016. The bank got the license of Small Finance Bank from Reserve Bank of India (RBI) in July 2016.

• PN Vasudevan is the Managing Director & CEO of Equitas Small Finance Bank.
• Headquarter of Equitas Small Finance Bank – Chennai, Tamil Nadu.
• Tagline – Its Fun Banking 

3. Utkarsh Small Finance Bank 

• It was formerly known as Utkarsh Micro Finance
• It started its operations with five branches across Varanasi, Patna, Delhi-NCR, and Nagpur in January 2017.
• The bank got the license of Small Finance Bank from Reserve Bank of India (RBI) in November 2016.

• Govind Singh is the Managing Director & CEO of Utkarsh Small Finance Bank.
• Headquarter of Utkarsh Small Finance Bank: Varanasi, UP
• Tagline: Apki Umeed Ka Khata

4. Suryoday Small Finance Bank (formerly Suryoday Micro Finance Ltd) started its banking operation in January 2017 in Belapur, Navi Mumbai. The bank got the license of Small Finance Bank from Reserve Bank of India (RBI) in November 2016.

• Baskar Babu Ramachandran is the Managing Director & CEO of Suryoday Small Finance Bank.
• Headquarter of Suryoday Small Finance Bank: Belapur, Navi Mumbai.
• Tagline: A Bank of Smiles. 

5. Ujjivan Small Finance Bank (subsidiary of Ujjivan Financial Services Ltd) started its banking operations in February 2017 in Bengaluru, Karnataka. The bank got the license of Small Finance Bank from Reserve Bank of India (RBI) in November 2016.

• Samit Ghosh is the Managing Director & CEO of Ujjivan Small Finance Bank.
• Headquarter of Ujjivan Small Finance Bank: Koramangala, Bengaluru, Karnataka.
• Tagline: Bharosa, Aap Ke Bharose Par

6. ESAF Small Finance Bank 

• It was formerly known as ESAF Microfinance and Investments Private Ltd.
• It started its banking operations in Thrissur, Kerala in March 2017.
• The bank got the license of Small Finance Bank from Reserve Bank of India (RBI) in November 2016.

• Headquarter of ESAF Small Finance Bank: Thrissur, Kerala.
• ESAF will be the first bank to be given a banking license in Kerala since independence.
• Tagline: Joy of Banking

Note: On 28 Dec 2018, Esaf Small Finance Bank has received the Reserve Bank approval to operate as a scheduled bank.

7. Au Small Finance Bank 

• It started its banking operation as a Small Finance Bank in April 2017.
• The bank got the license of Small Finance Bank from Reserve Bank of India (RBI) in December 2016.

• Sanjay Agarwal is the Managing Director & CEO of Au Small Finance Bank.
• Headquarter of Au Small Finance Bank: Jaipur, Rajasthan.
• Tagline: Chalo Aage Badhe

8. Fincare Small Finance Bank

• It was previously known as Disha Microfin Limited and started its banking operations in September 2017, with about 25 operational branches across Gujarat, Tamil Nadu, Karnataka and Andhra Pradesh. 

• Rajeev Yadav is the Managing Director & CEO of Fincare Small Finance Bank.
• Headquarters: Bengaluru, Karnataka.
• Tagline: Banking on More.

9. North East Small Finance Bank

• October 2017.
• The Rashtriya Gramin Vikas Nidhi Microfinance Limited-North East (RGVNMFL-NE), the promoter of North East Small Finance Bank, got the license of Small Finance Bank from Reserve Bank of India (RBI) in March 2017.

• MD: Rupali Kalita 
• Headquarters of North East Small Finance Bank: Guwahati, Assam.
• Tagline: Your Door Step Banker

10. Jana Small Finance Bank

• Established: March 2018. 

• Headquarters of Jana Small Finance Bank: Bengaluru
• Tagline: Paise Ke Kadar
• MD & CEO: Ajay Kanwal

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