Reserve Bank of India(RBI) on Wednesday Sep 16,2015 granting ‘in-principle’ approval to 10 entities to start small finance banks
Barring Jaipur-based Au Financiers (an asset finance company) and
Jalandhar-based Capital Local Area Bank, all the other entities are
microfinance institutions. This is an indication that the RBI sets great
store by microfinance institutions to further the cause of financial
inclusion.
The 10 companies have been given 18 months to comply with the guidelines for licensing of small finance banks
Of the 72 companies that applied for a licence, the prominent names that
did not make it in this round include Dewan Housing Finance Corp, IIFL
Holdings Ltd, Lulu Forex Pvt Ltd, Satin Creditcare Network, SKS
Microfinance, and UAE Exchange & Financial Services.
Note
Small finance banks are different from traditional banks because they
will primarily undertake basic banking activities, of acceptance of
deposits and lending, to un-served and underserved sections, including
small business units, small and marginal farmers, micro and small
industries and unorganised sector entities.
These banks are required to extend 75 per cent of their loans to the
sectors eligible for classification as priority sector lending
(agriculture, micro, small and medium enterprises, education, housing,
etc).
At least 50 per cent of their loan portfolio should constitute loans and advances of up to ₹25 lakh.
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