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SMALL FINANCE  BANKS 

WHAT ARE SMALL FINANCE BANKS IN INDIA ?

           Small finance banks  are a type of niche banks in India. Banks with a small finance bank license can provide basic banking service of acceptance of deposits and lending. The aim behind these to provide financial inclusion sections of the economy not being served by other banks .          

Basically   Small Finance banks  would help  small business units, small and marginal farmers, micro and small industries and unorganised sector entities in India.     On 16th September 2015 ,   Reserve Bank of India has   given licence  or in -principle approval  to 10 entities for    opening such banks    out of the 72 applications received . According to a statement by RBI, the in-principle approval granted  is  valid for 18 months to enable the applicants to comply with the requirements under the Guidelines and fulfil other conditions as may be stipulated by them

The ten  companies are 

1.  Au Financiers (India) Limited, Jaipur 
2. Capital Local Area Bank Limited, Jalandhar 
3. Disha Microfin Private Limited, Ahmedabad 
4. Equitas Holdings P Limited, Chennai 
5. ESAF Microfinance and Investments Private Limited, Chennai 
6. Janalakshmi Financial Services Private Limited, Bengaluru 
7. RGVN (North East) Microfinance Limited, Guwahati 
8. Suryoday Micro Finance Private Limited, Navi Mumbai 
9. Ujjivan Financial Services Private Limited, Bengaluru 
10. Utkarsh Micro Finance Private Limited, Varanasi.
    
    

  Small Finance  Banks  are licensed  and   regulated by    Reserve Bank of India . The minimum  capital requirements for such banks is Rs 100  crores   .  Promoter stake must be at 40 percent in first 5 years - Promoter stake to be brought down to 30 percent within 10 yrs, 26 percent  in 12 years  .Joint ventures are not permitted. Foreign share holding will be allowed in these banks as per the rules for FDI in private banks in India.  Listing mandatory within 3 years of reaching Rs. 500 crore net worth .

 Guidelines issued by   RBI  for operations of the banks  are as  follows :

1.  75 percent of Adjusted Net Bank Credit to be extended to priority sector 
2.  50 percent of loan portfolio to constitute loans & advances of upto Rs 25 lakh 
3.  25   percentage of  branches must be in unbanked rural areas 
4.  Maximum loan size & investment limit to single obligor restricted to 10 percent of capital funds 
5.  Maximum loan size & investment limit to a group restricted to 10 percent of capital funds 
6.  CRR, SLR requirement as applicable to existing commercial banks from Day 1

 The draft guidelines   issued by  Reserve  Bank of India on Payment Banks  is available on their website .
 To reach the guidelines . CLICK HERE   . Further RBI , on 06.07.2017 , has issued  compendium of Guidelines to Small Finance Banks   which can be accessed by CLICKING HERE 

WHAT WE CAN EXPECT FROM SMALL FINANCE  BANKS ?

  Licences for  Small Finance Banks   are now issued to existing micro finance institutions   which are already in the business of   lending to   small and tiny entities .  But once they establish small finance  banks , they can increase their  loan size  to their customers . And they can also  receive deposits , distribute mutual funds  , insurance products  etc .   Hence   we  can expect competition to increase in the   rural banking  ans existing banks have to gear up to face it .  

As per  RBI licence , new  small finance  banks were  to be set up within 18 months .    Now all the ten licencees  have opened their banks 

   ACTIVE SMALL FINANCE BANKS 

     Presently Following Small  Finance Banks   have started operation . 
    ( CLICK ON THE NAME OF THE BANK TO GO TO THEIR WEBSITE   )

1.  AU SMALL FINANCE BANK    :    Licence given by  RBI  to Au Financiers (India) Limited, Jaipur   .

2. CAPITAL SMALL FINANCE BANK  : ​   Licence given by  RBI  to   Capital Local Area Bank Limited, Jalandhar 

​3. SURYODAY SMALL FINANCE BANK  : ​ Licence given by  RBI  to Suryoday Micro Finance Private Limited, Navi Mumbai  

4. UJJIVAN SMALL FINANCE BANK  :  ​Licence given by  RBI   to  Ujjivan Financial Services Private Limited, Bengaluru  . 

5. UTKARSH SMALL FINANCE BANK    :   ​​Licence given by  RBI   to  Utkarsh Micro Finance Private Limited, Varanasi.  

6 EQUITAS SMALL FINANCE BANK   :   ​​​Licence given by  RBI   to   Equitas Holdings P Limited, Chennai 

7 ESAF SMALL FINANCE BANK   :      ​Licence given by  RBI   to   ESAF Microfinance and Investments Private Limited, Chennai  . 

​8  JANA SMALL FINANCE BANK    :   ​Licence given by  RBI   to   Janalakshmi Financial Services Private Limited, Bengaluru   

9 . FINCARE SMALL FINANCE BANK   :  ​Licence given by  RBI   to  Disha Microfin Private Limited, Ahmedabad ​  

10 : NORTH EAST SMALL FINANCE BANK : ​  ​Licence given by  RBI   to RGVN (North East) Microfinance Limited, Guwahati 

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DEPOSIT RATES OF SMALL FINANCE BANKS

  Generally small finance banks are paying higher FD interest rates compared to commercial banks  , public sector or private banks   .The highest yield on Bank Deposits   for one year matirity  come   generally  from small finance banks .  Utkarsh   Small finance Bank  pays  8.20  %  for 1 year public deposit  and 8.70 % for senior citizens  . Similarly for 5 year deposits , Small finance banks pay    between  6.50  % to 9.00 % for public and 7.00 % to  9.25  %  for senior  citizens  , which are generally higher than other  banks . 

For complete details of interest you can receive from  banks including  Small Finance Banks ,  visit our page on FD INTEREST RATES 

TO KNOW ABOUT PAYMENT BANKS  , CLICK HERE 

PRECAUTIONS WHILE  INVESTING
CLICK HERE TO READ 
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