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WHAT ARE SMALL FINANCE BANKS IN INDIA ? |
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NEW SMALL FINANCE BANKS ON THE WAY
UNITY SMALL FINANCE BANK BEGINS ITS OPERATIONS
Dated 02.11.2021 : Reserve Bank of India (RBI) had issued a small finance bank (SFB) licence to Unity Small finance Bank in June 2021 . It is floated by the Centrum Group-BharatPe consortium. It has begun its operations yesterday . The new bank is expected to take over the assets and liabilities of the beleaguered PMC Bank which is put under section 35a OF RBI Act restricting its operations .
The Unity SFB will have to be guided by the directions and timelines of the RBI on the amalgamation of Punjab & Maharashtra Co-Operative Bank Limited with them . Centrum consortium was one of the bidders that had offered to participate in reconstruction of the bank, in response to the Expression of Interest (EOI) dated November 3, 2020 floated by the bank. RBI and PMC Bank have been engaging with them in order to secure best possible terms for the depositors and other stakeholders of PMC Bank while ensuring long term viability of the reconstructed entity.
Unity Bank will be a digital first bank with a business model of collaboration and open architecture, uniting all its stakeholders to deliver a seamless digital experience. The Bank commences operations with Centrum’s successful MSME and Micro Finance businesses and teams, a capital infusion of approx. Rs 1,100 crores, total assets of about Rs 2400 crores, active customer base of over 2 lakhs, 145 offices including a branch in Centrum House, Mumbai, getting off to a strong start.
About centrum Group : The group was established in 1997 . Centrum has diversified fee businesses and a lending platform for institutions and individuals. Institutional services include Investment Banking, Mid-corporates & SME credit and Broking to FIIs, Pension Funds, Indian Mutual Funds, Domestic Institutions etc. It also provides MSME credit, Wealth Management Servicesto HNIs and Family Offices, Affordable Housing finance in tier 2 & 3 cities, Micro Finance loans and Retail Broking. Its Asset Management business offers funds across Private Debt and Venture Capital.
About Bharat Pe : BharatPe was co-founded by Ashneer Grover and Shashvat Nakrani in 2018 with the vision of making financial
inclusion a reality for Indian merchants. In 2018, BharatPe launched India’s first UPI interoperable QR code, the first zero MDR payment acceptance service. In 2020, post-Covid, BharatPe also launched India’s only zero MDR card acceptance terminals – BharatSwipe. Currently serving over 70 lakh merchants across 140+ cities, the company is a leader in UPI offline transactions, processing 11 crores+ UPI transactions per month (annualized Transaction Processed Value of US$ 11+ Bn). The company has already facilitated disbursement of loans totaling to over Rs. 2,200 crores to its merchants, since launch. BharatPe’s POS business processes payments of over Rs. 1,400 crores/ month. BharatPe has raised close to US$ 600 million in equity and debt, till date. The company’s list of marquee investors includes Tiger Global, Dragoneer Investment Group, Steadfast Capital, Coatue Management, Ribbit Capital, Insight Partners, Steadview Capital, Beenext, Amplo
and Sequoia Capital. In June 2021, the company announced the acquisition of PAYBACK India, the country’s largest multi-brand loyalty program company with 100 million+ members. In June 2021, it was also given an in-principle approval by Reserve Bank of India to establish a Small Finance Bank, in partnership with Centrum Financial Services Limited (Centrum), the established and profitable NBFC arm of the Centrum Group.
Source : websites of respective companies .
Dated 02.11.2021 : Reserve Bank of India (RBI) had issued a small finance bank (SFB) licence to Unity Small finance Bank in June 2021 . It is floated by the Centrum Group-BharatPe consortium. It has begun its operations yesterday . The new bank is expected to take over the assets and liabilities of the beleaguered PMC Bank which is put under section 35a OF RBI Act restricting its operations .
The Unity SFB will have to be guided by the directions and timelines of the RBI on the amalgamation of Punjab & Maharashtra Co-Operative Bank Limited with them . Centrum consortium was one of the bidders that had offered to participate in reconstruction of the bank, in response to the Expression of Interest (EOI) dated November 3, 2020 floated by the bank. RBI and PMC Bank have been engaging with them in order to secure best possible terms for the depositors and other stakeholders of PMC Bank while ensuring long term viability of the reconstructed entity.
Unity Bank will be a digital first bank with a business model of collaboration and open architecture, uniting all its stakeholders to deliver a seamless digital experience. The Bank commences operations with Centrum’s successful MSME and Micro Finance businesses and teams, a capital infusion of approx. Rs 1,100 crores, total assets of about Rs 2400 crores, active customer base of over 2 lakhs, 145 offices including a branch in Centrum House, Mumbai, getting off to a strong start.
About centrum Group : The group was established in 1997 . Centrum has diversified fee businesses and a lending platform for institutions and individuals. Institutional services include Investment Banking, Mid-corporates & SME credit and Broking to FIIs, Pension Funds, Indian Mutual Funds, Domestic Institutions etc. It also provides MSME credit, Wealth Management Servicesto HNIs and Family Offices, Affordable Housing finance in tier 2 & 3 cities, Micro Finance loans and Retail Broking. Its Asset Management business offers funds across Private Debt and Venture Capital.
About Bharat Pe : BharatPe was co-founded by Ashneer Grover and Shashvat Nakrani in 2018 with the vision of making financial
inclusion a reality for Indian merchants. In 2018, BharatPe launched India’s first UPI interoperable QR code, the first zero MDR payment acceptance service. In 2020, post-Covid, BharatPe also launched India’s only zero MDR card acceptance terminals – BharatSwipe. Currently serving over 70 lakh merchants across 140+ cities, the company is a leader in UPI offline transactions, processing 11 crores+ UPI transactions per month (annualized Transaction Processed Value of US$ 11+ Bn). The company has already facilitated disbursement of loans totaling to over Rs. 2,200 crores to its merchants, since launch. BharatPe’s POS business processes payments of over Rs. 1,400 crores/ month. BharatPe has raised close to US$ 600 million in equity and debt, till date. The company’s list of marquee investors includes Tiger Global, Dragoneer Investment Group, Steadfast Capital, Coatue Management, Ribbit Capital, Insight Partners, Steadview Capital, Beenext, Amplo
and Sequoia Capital. In June 2021, the company announced the acquisition of PAYBACK India, the country’s largest multi-brand loyalty program company with 100 million+ members. In June 2021, it was also given an in-principle approval by Reserve Bank of India to establish a Small Finance Bank, in partnership with Centrum Financial Services Limited (Centrum), the established and profitable NBFC arm of the Centrum Group.
Source : websites of respective companies .
RBI RECEIVES APPLICATIONS FOR NEW SMALL FINANCE BANKS :
Dated 01.09.2021 : Reserve Bank of India has received applications under the Guidelines for ‘on tap’ Licensing of Small Finance Banks dated December 5, 2019 from the following applicants –
- VSoft Technologies Private Limited
- Calicut City Service Co-operative Bank Limited
- Shri Akhil Kumar Gupta
- Dvara Kshetriya Gramin Financial Services Private Limited
- Cosmea Financial Holdings Private Limited
- Tally Solutions Private Limited
In " on-tap " licensing . an applicant can apply to RBI on any time . The applications will go through the following procedure before they get a licence by RBI :
- At the first stage, the applications will be screened by RBI to assess the eligibility of the applicants, vis-à-vis the criteria laid down in these guidelines. RBI may apply additional criteria to determine the suitability of applications, in addition to the ‘fit and proper’ criteria prescribed at paragraph 3 above. Thereafter, the applications will be referred to a Standing External Advisory Committee (SEAC) to be set up by RBI.
- The SEAC will comprise of eminent persons with experience in banking, financial sector and other relevant areas. The tenure of the SEAC will be for three years.
- The SEAC will set up its own procedures for screening the applications. The SEAC will meet periodically, as and when required. The Committee will reserve the right to call for more information as well as have discussions with any applicant/s and seek clarification on any issue as may be required by it. The Committee will submit its recommendations to RBI for consideration.
- The Internal Screening Committee (ISC), consisting of the Governor and the Deputy Governors will examine all the applications. The ISC will also deliberate on the rationale of the recommendations made by the SEAC and then submit its recommendations to the Committee of the Central Board (CCB) of RBI for the final decision to issue ‘in-principle approval’.
- The validity of the ‘in-principle approval’ issued by RBI will be 18 months from the date of granting ‘in-principle approval’ and would thereafter lapse automatically. Therefore, the -applicant will have to obtain the license within a period of 18 months of granting the ‘in-principle approval’.
- After issue of the ‘in-principle approval’ for setting up of a small finance bank, if any adverse features are noticed regarding the Promoters or the companies / entities with which the Promoters are associated and the group in which they have interest, the RBI may impose additional conditions and if warranted, may withdraw the ‘in-principle approval’.
- The names of applicants that are found suitable for grant of in-principle approval will also be placed on the RBI website.
- An applicant who has not been found suitable for issue of license will be advised of the Reserve Bank’s decision. Such applicants will not be eligible to make an application for a banking license for a period of three years from the date of that decision.
- Applicants aggrieved by the decision of the Committee of the Central Board can prefer an appeal against the decision to the Central Board of Directors, within one month from the date of receipt of communication from RBI relating to the application not being considered as at paragraph 16 (h) above.
- Who can apply for SFB Licence ?
1. Resident individuals/professionals (Indian citizens), singly or jointly, each having at least 10 years of experience in banking and finance at a senior level;
2. Companies and Societies in the private sector, that are owned and controlled by residents (as defined in FEMA Regulations, as amended from time to time), and having successful track record of running their businesses for at least a period of five years, will be eligible as promoters to set up small finance banks.
3. Existing Non-Banking Finance Companies (NBFCs), Micro Finance Institutions (MFIs), and Local Area Banks (LABs) in the private sector, that are controlled by residents , and having successful track record of running their businesses for at least a period of five years, can also opt for conversion into small finance banks
Who are not eligible to apply ?
1. Joint ventures by different promoter groups for the purpose of setting up small finance banks would not be permitted.
2. Proposals from public sector entities and large industrial house / business groups, including from NBFCs promoted by them, autonomous boards / bodies set up under enactment of a State legislature, state financial corporations, subsidiaries of development financial institutions, will not be entertained. For the purpose of these guidelines, a Group with assets of Rs.5,000 crore or more with the non-financial business of the group accounting for 40 per cent or more in terms of total assets / gross income, will be treated as a large industrial house / business groups.
- What business a SFB can do ?
- The small finance bank can undertake basic banking activities of acceptance of deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities. It can also undertake other non-risk sharing simple financial services activities, not requiring any commitment of own fund, such as distribution of mutual fund units, insurance products, pension products, etc. with the prior approval of the RBI and after complying with the requirements of the sectoral regulator for such products. The small finance bank can also become a Category II Authorised Dealer in foreign exchange business for its clients’ requirements.
- Minimum Capital required : The minimum paid-up voting equity capital for small finance banks shall be Rs.200 crore,
JANA SMALL FINANCE BANK ALLOWS CUSTOMERS TO CHOOSE THEIR ACCOUNT NUMBER :
Dated 12.05.2021 : Bengaluru based Jana Small Finance Bank has come out with a new feature for its new savings bank and current account customers and they can choose last 10 numbers in the account numbers to be allotted to them by the bank . While opening an account , Customers can choose any 10 numbers of their choice and will be allotted by the bank as the last 10 digits of the account number to be opened , subject to availability of the number in their system .
For further details , you may visit bank's website
Dated 12.05.2021 : Bengaluru based Jana Small Finance Bank has come out with a new feature for its new savings bank and current account customers and they can choose last 10 numbers in the account numbers to be allotted to them by the bank . While opening an account , Customers can choose any 10 numbers of their choice and will be allotted by the bank as the last 10 digits of the account number to be opened , subject to availability of the number in their system .
For further details , you may visit bank's website
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
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
- Au Financiers (India) Limited, Jaipur
- Capital Local Area Bank Limited, Jalandhar
- Disha Microfin Private Limited, Ahmedabad
- Equitas Holdings P Limited, Chennai
- ESAF Microfinance and Investments Private Limited, Chennai
- Janalakshmi Financial Services Private Limited, Bengaluru
- RGVN (North East) Microfinance Limited, Guwahati
- Suryoday Micro Finance Private Limited, Navi Mumbai
- Ujjivan Financial Services Private Limited, Bengaluru
- Utkarsh Micro Finance Private Limited, Varanasi.
LICENCES FOR SMALL FINANCE BANKS
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
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
SHIVALIK SMALL FINANCE BANK BEGINS ITS OPERATIONS :
Dated 27.04.2021 : UP headquartered Shivalik Small Finance Bank has begun its banking operations yesterday . It was given license in January 2021 by Reserve Bank of India ( RBI ) .
Its parent body is a multistate co-operative society operating in Uttar Pradesh , Delhi & Madhyapradesh which is doing its business since 1998 . Its headquarters and Registered office is in Sahranpur , UP . The bank has 31 branches and 57 ATMs .
Other Details :
IFSC CODE : SMCB000 1001 till 1031
Telefax : 0120-4060000 email : [email protected]
website : www.shivalikbank.com Facebook page : www.facebook.com/shivalikbank
As of 31st , March 2020 , the bank had a deposit of Rs 1,139 crores and advance of Rs 718 crores .
Shivalik Small Finance Bank is the 11th bank small finance bank operating in India .
Dated 27.04.2021 : UP headquartered Shivalik Small Finance Bank has begun its banking operations yesterday . It was given license in January 2021 by Reserve Bank of India ( RBI ) .
Its parent body is a multistate co-operative society operating in Uttar Pradesh , Delhi & Madhyapradesh which is doing its business since 1998 . Its headquarters and Registered office is in Sahranpur , UP . The bank has 31 branches and 57 ATMs .
Other Details :
IFSC CODE : SMCB000 1001 till 1031
Telefax : 0120-4060000 email : [email protected]
website : www.shivalikbank.com Facebook page : www.facebook.com/shivalikbank
As of 31st , March 2020 , the bank had a deposit of Rs 1,139 crores and advance of Rs 718 crores .
Shivalik Small Finance Bank is the 11th bank small finance bank operating in India .
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
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
LIST OF ACTIVE SMALL FINANCE BANKS IN INDIA
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
( 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
TAX ON RETIREMENT CLICK HERE TO READ
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 7.75 % for 1 year public deposit and 8.25 % 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 . Suryuodaya SF Bank pays highest of 9 % for the public and 9.25 % for the senior citizens .
For complete details of interest you can receive Small Finance Banks , click here
For complete details of interest you can receive Small Finance Banks , click here
TO KNOW ABOUT PAYMENT BANKS , CLICK HERE
PRECAUTIONS WHILE INVESTING
CLICK HERE TO READ
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TAX ON RETIREMENT
MORE THAN 2000 VIEWS IN ITS FIRST WEEK OF PUBLICATION
CLICK HERE TO READ
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HOW TO LINK YOUR AADHAR TO PAN ? CLICK HERE
New Updated Article
TAX PLANNING FOR FY 2021-22 ( AY 2022-23 )
Comprehensive Article on Income tax changes in Rules, Rates , Slabs , Rebates and Estimation
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CLICK HERE TO READ
----------------------------------------------------------------------
TAX ON RETIREMENT
MORE THAN 2000 VIEWS IN ITS FIRST WEEK OF PUBLICATION
CLICK HERE TO READ
----------------------------------------------------------------------------------------------------------------
HOW TO LINK YOUR AADHAR TO PAN ? CLICK HERE
New Updated Article
TAX PLANNING FOR FY 2021-22 ( AY 2022-23 )
Comprehensive Article on Income tax changes in Rules, Rates , Slabs , Rebates and Estimation
CLICK HERE TO READ
