RBI rejected applications to set up three small finance banks, here's the reason
RBI has rejected applications to set up three small finance banks. The central bank stated that these applications were not correct in principle. RBI had received a dozen applications for getting a bank license under on tap. Out of which the central bank has already given its decision on 6.
Three of the applications received by the Reserve Bank of India to start a small finance bank have been rejected. This also included an application made by West End Housing Finance.
On behalf of RBI, it was said that these applications were not found correct in principle for setting up Small Finance Bank, due to which they have not been approved by the central bank.
RBI has received around a dozen applications for universal bank and small finance bank (SFB) license 'on tap'. In May last year, the RBI had decided on six applications. Three more applications have been rejected by RBI. It was said by the central bank that three more applications are being assessed.
A report in the news agency PTI stated that the applications have not been found to be correct on the parameters to set up a small finance bank. For this reason, none of these have been approved.
Guidelines for 'on tap' licensing of universal banks and SFBs in the private sector were issued on August 1, 2016, and December 5, 2019.
According to this guideline, to set up a universal bank, there should be an equity capital of at least Rs 500 crore and the net worth of the bank is Rs 500 crore. Whereas, for Small Finance Bank, the equity capital and net worth should be Rs 200 crore. Urban cooperative banks can voluntarily become SFBs. For this, there should be a minimum capital of 100 crores and it has to be increased to 200 crores within five years.
