If small financial banks fulfill the requirements, they may become members of Big League. Bank Reserve

Small financing banks (SFBs) have been informed that, upon meeting the necessary requirements, they may become universal banks.

SFBs that want to expand their operations may apply for the necessary permissions via the on-tap licensing window, according to the Reserve Bank of India (RBI).

The number of SFBs with RBI licenses now stands at 11 (there were 12 before the merger of AU Small Finance Bank and Fincare Small Finance Bank). Eight of them have stock listings on the exchanges.

Now that they have been in existence for five years, the SFBs have been pushing for the ability to become universal banks.

As per the RBI’s rules for the on-tap licensing of universal banks, SFBs that have shown adequate performance over a minimum of five years may be eligible to become universal banks. One of the main goals of SFBs is financial inclusion, and they are required to provide 75% of their adjusted net bank credit to the priority sector. The aim for priority sector lending for commercial banks is limited to 40%.

The RBI said that SFBs must have a minimum net value of ₹1,000 crore at the end of the preceding quarter (audited) in order to be eligible to apply to become universal banks. Additionally, the bank’s shares had to have been listed on a reputable exchange.

Additionally, it must have had a net profit in the previous two fiscal years, as well as gross non-performing assets (GNPA) and net non-performing assets (NNPA) in the previous two fiscal years that are less than or equal to 3% and 1%, respectively.

The RBI also said that SFB must have a minimum of five years of good performance history and achieve their specified capital adequacy ratio, which is now 15% as required by regulation.

The RBI said, “An identified promoter is not a requirement for an eligible SFB.” “On the transition to Universal Bank, the current promoters of the eligible SFB, if any, shall continue as the promoters.”

During the changeover period, the SFB will not be able to add new promoters or replace its current promoter.