New Guidelines for SFB Licences

Reserve Bank of India (RBI)

In News

The Reserve Bank of India (RBI) has laid out new guidelines for Payments Banks to apply for Small Finance Bank (SFB) license.


  • As per the new guidelines, a Payments Bank (PB) can apply for an on-tap SFB licence only after completing five years of operations.
  • Such PBs must be under the control of resident Indians.
  • Also, they must be eligible for conversion into SFB if they comply with all legal and regulatory requirements.
  • To set up an SFB, the minimum capital requirement is Rs. 200 crore.
  • But, for primary urban co-operative banks (UCBs) that wish to become an SFB, the capital requirement is Rs. 100 crore and will be increased to Rs. 200 crore within five years from the commencement of business.
  • The RBI is set to amend some regulations regarding UCBs to promote financial inclusion, reduce concentration risk, priority sector lending, etc.
  • Also, the RBI has brought UCBs with assets above Rs. 500 crore under CRILC ( Central Repository of Information on Large Credits) reporting framework.

Small Finance Banks

  • These are niche banks with both deposit-taking and moneylending services.
  • These banks are different from Payments Banks in the sense that in PBs, restricted deposits are accepted which the current limit is Rs. 1 lakh.
  • Also, PBs are not allowed to provide loans and credit cards, but SFBs can.
  • The idea behind launching SFBs is to provide financial inclusions to the sections of the country that are being neglected by other banks.
  • These include small business units, small and marginal farmers, micro and small industries, entities from the unorganised sector etc.
  • So far, Non-Banking Finance Companies (NBFCs), Microfinance institutions, and local area banks can apply for SFB licence.
  • The new guidelines brought Payment Banks into the ambit of getting an SFB licence.

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