Published: 13th Apr, 2019
Context
- According to data from the Reserve Bank of India (RBI), small finance bank's deposits increased by 31.6% in the third quarter (ending December) of this financial year in comparison to the second quarter.
- The amazing expansion of small finance banks has occurred on a relatively modest scale, which is why larger banks and NBFCs do not view them as competitors just yet.
About
The small finance bank would primarily engage in fundamental banking operations such as deposit acceptance and lending to unserved and underserved segments such as small businesses, marginal farmers, micro and small enterprises, and unorganized sector organizations.
Advantages-
- Accept modest deposits and provide loans.
- Offer mutual funds, insurance policies, and other basic third-party financial goods.
- Loan 75% of their entire modified net bank credit to the priority sector.
- The maximum loan size is 10% of capital funds for a single borrower and 15% for a group.
- A minimum of 50% of the loan should be up to Rs. 25 lakh.
Guidelines:
- The promoter must provide at least 40% equity capital, which should be reduced to 30% within ten years.
- The minimum invested capital will be Rs 100 crore.
- The ratio of capital adequacy should be 15% of risk-weighted resources, with Tier I at 7.5%.
- Foreign shareholding is limited to 74% of paid capital; FPIs cannot own more than 24%.
- Priority sector lending requirement of 75% of total adjusted net bank credit.
- 50% of loans must be up to Rs 25 lakh.
Courses
Study
Notes
Home
Resources
More
