Applications from qualified small finance banks to become regular banks are being accepted by the Reserve Bank of India

The Reserve Bank of India opened applications for regular or universal bank status on Friday to small financing institutions that fit certain requirements, such as having a minimum net value of Rs 1,000 crore.

The rules for licensing small financing banks (SFBs) in the private sector were released by the RBI in November 2014. Ujjivan Small Finance Bank, Equitas Small Finance Bank, and Au Small Finance Bank are just a few of the twelve SFBs.

According to the central bank, an SFB that wants to become a universal bank must have had shares listed on a recognized stock market and a minimum net value of Rs 1,000 crore as of the end of the preceding quarter (audited).

Additionally, it should have had a net profit in the previous two fiscal years, as well as GNPA and NNPA in the previous two fiscal years that were less than or equal to 3% and 1%, respectively.

A required capital-to-risk weighted asset ratio (CRAR) and a minimum of five years of good performance history are additional requirements.

Regarding the ownership structure, the RBI stated: “Having a recognized promoter is not a must for a qualifying SFB. On the switch to Universal Bank, the current promoters of the qualified SFB, if any, will still be in that role.

Furthermore, during the transition period, an eligible SFB would not be allowed to add new promoters or alter existing promoters.

“There shall be no new mandatory lock-in requirement of minimum shareholding for existing promoters in the transitioned universal bank,” the circular said.

The RBI made available the conversion route for SFBs to become universal banks in December 2019.