• The Reserve Bank of India (RBI) recently rejected three applications for small finance bank licences as they “were not found suitable for granting of in-principle approval.”

ABOUT SMALL FINANCE BANKS

Capital Small Finance Bank (formerly Capital Local Area Bank Ltd) was India’s first small finance bank that started its banking operations in April 2016 in Jalandhar, Punjab.

• Scope- Basic banking activities of acceptance of deposits and lending to unserved and underserved sections.
• They are registered as a public limited company under the Companies Act, 2013.
• The minimum paid-up voting equity capital for small finance banks shall be Rs.200 crore, except for such small finance banks which are converted from UCBs.
• The Promoter shall hold a minimum of 40 per cent of the paid-up voting equity capital of the bank, which shall be locked-in for a period of five years.
• SFBs need to maintain a Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
• They are required to extend 75% of its Adjusted Net Bank Credit (ANBC) to the sectors eligible for classification as priority sector lending by the Reserve Bank of India.
• At least 50% of its loan portfolio should constitute loans and advances of up to Rs. 25 lakh.
• They cannot be a Business Correspondent (BC) for another bank.
  • However, they can have their own BC network.