RBI issues guidelines for voluntary transition of small finance bank into Universal Bank

It will be licensed under Section 22 of the Banking Regulation Act, 1949 and governed by the provisions of the Banking Regulation Act, 1949; Reserve Bank of India Act, 1934; Foreign Exchange Management Act, 1999; Payment and Settlement Systems Act, 2007; Credit Information Companies (Regulation) Act, 2005; Deposit Insurance and Credit Guarantee Corporation Act, 1961; other relevant Statutes and the Directives, Prudential Regulations and other Guidelines/ Instructions issued by Reserve Bank of India (RBI) and other regulators from time to time.

The small finance banks will be given scheduled bank status once they commence their operations.

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 To bring better clarity, the eligibility criteria for an SFB to transition into a Universal bank will now be as follows:

scheduled status with a satisfactory track record of performance for a minimum period of five years;

shares of the bank should have been listed on a recognized stock exchange;

having a minimum net worth of ?1,000 crore as of the end of the previous quarter (audited);

meeting the prescribed CRAR requirements for SFBs;

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having a net profit in the last two financial years; and

having GNPA and NNPA of less than or equal to 3 percent and 1 percent respectively in the last two financial years.

 The eligible SFB shall be required to furnish a detailed rationale for such transition. The application for the transition from SFB to Universal Bank shall be assessed under the Guidelines for ‘on tap’ Licensing of Universal Banks in the Private Sector dated August 1, 2016, as applicable, and Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions, 2023 dated January 16, 2023, as amended from time to time. Further, on transition, the bank will be subjected to all the norms including NOFHC structure (as applicable) as per the said Guidelines.

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