‘Rs 200 cr minimum capital needed for small finance Banks’

Mumbai: The Reserve Bank of India’s draft guidelines for ‘on tap’ licensing for ‘Small Finance Banks in the Private Sector’ proposed a minimum paid-up voting equity capital of Rs 200 crore to set up such entities.

A small finance bank undertakes basic banking activities of accepting deposits and lending to unserved and underserved sections, including small business units, small and marginal farmers, micro and small industries and unorganised sector entities.

“The minimum paid-up voting equity capital for small finance banks shall be Rs 200 crore, except for such small finance banks which are converted from UCBs (Co-operative Banks)…,” RBI said in its guidelines released on Friday.

“In view of the inherent risk of a small finance bank, it shall be required to maintain a minimum capital adequacy ratio of 15 per cent of its risk-weighted assets (RWA) on a continuous basis,” it added.

The draft guidelines further said that after the small finance bank reaches the net worth of Rs 500 crore, the listing will be made mandatory within three years of reaching that net worth.