This Reserve Bank of India (RBI) circular, reference number RBI/2019-20/196 DOR.NBD.No.4416/13.02.118/2019-20 dated March 28, 2020, addresses modifications to the existing norms for Small Finance Banks (SFBs) licensed under the guidelines issued on November 27, 2014, and the on-tap licensing guidelines released on December 5, 2019.
The circular harmonizes instructions for existing SFBs with those to be licensed under the on-tap guidelines. Key changes include:
* Granting general permission to all existing SFBs to open banking outlets, contingent upon adherence to Unbanked Rural Centre norms as per the RBI circular on Rationalisation of Branch Authorisation Policy dated May 18, 2017 (as amended).
* Exempting existing SFBs from seeking prior RBI approval for undertaking non-risk-sharing simple financial service activities (not requiring own fund commitment) after three years of business commencement.
* Clarifying that a promoter's ability to cease being a promoter or exit the bank after five years depends on RBI's regulatory and supervisory comfort/discomfort and SEBI regulations at that time, referencing query number 101 of clarifications dated January 1, 2015.
* Clarifying that "paid-up equity capital" in the 2014 guidelines means "paid-up voting equity capital," referencing query number 104 of clarifications dated January 1, 2015.
The circular is effective immediately. For further information, contact Shrimohan Yadav, Chief General Manager, Department of Regulation, Central Office, 13th floor, Central Office Building, Shahid Bhagat Singh Marg, Mumbai – 400001. Tel No: 91-22-22601000, Fax No: 91-22-22701240, Email ID: cgmicdbr@rbi.org.in.
Key Entities Referenced
Small Finance Banks: A type of financial institution in India licensed by the Reserve Bank of India to provide basic banking services.
Reserve Bank of India: The central bank of India, responsible for regulating the banking sector.
Guidelines for Licensing of Small Finance Banks in Private Sector dated November 27, 2014: A policy document issued by the Reserve Bank of India outlining the requirements for licensing Small Finance Banks in the private sector.
Guidelines for ontap Licensing of Small Finance Banks in Private Sector released by Reserve Bank on December 5, 2019: A policy document issued by the Reserve Bank of India outlining the requirements for ontap licensing of Small Finance Banks in the private sector.
Unbanked Rural Centre: A geographical area with limited or no access to banking services, as defined by the Reserve Bank of India.
RBI circular on Rationalisation of Branch Authorisation Policy Revision of Guidelines dated May 18, 2017: A circular issued by the Reserve Bank of India concerning the authorization of bank branches.
SEBI: The Securities and Exchange Board of India, the regulator for the securities market in India.
Mumbai, Maharashtra: A city in Maharashtra, location of the Central Office Building of Reserve Bank of India
RBI/2019-20/196
DOR.NBD.No.44/16.13.218/2019-20 March 28, 2020
Managing Director and Chief Executive Officers
of Small Finance Banks
Madam / Dear Sir,
‘Guidelines for Licensing of Small Finance Banks in Private Sector’ dated November
27, 2014 – Modifications to existing norms
Please refer to the ‘Guidelines for Licensing of Small Finance Banks in Private Sector’ dated
November 27, 2014 under which licenses were issued to 10 Small Finance Banks (SFBs)
and the ‘Guidelines for ‘on-tap’ Licensing of Small Finance Banks in Private Sector’ released
by Reserve Bank on December 5, 2019.
2. To harmonise the instructions for existing SFBs with those SFBs to be licensed under
‘Guidelines for ‘on-tap’ Licensing’, it has been decided to:
a) Grant general permission to all existing SFBs to open banking outlets subject to
adherence to Unbanked Rural Centre norms as per RBI circular on ‘Rationalisation
of Branch Authorisation Policy - Revision of Guidelines’ dated May 18, 2017, as
amended from time to time.
b) Exempt all existing SFBs from seeking prior approval of Reserve Bank for
undertaking such non risk sharing simple financial service activities, which do not
require any commitment of own fund, after three years of commencement of
business of SFB.
3. Further, in case of existing SFBs, it is clarified that -
a) Whether a promoter could cease to be a promoter or could exit from the bank after
completion of a period of five years, would depend on the RBI’s regulatory and
supervisory comfort / discomfort and SEBI regulations in this regard at that time
(Reference: Response to query number 101 of ‘Clarifications to queries on
guidelines for licensing of Small Finance Banks in the Private Sector’ dated January
1, 2015).
िविनयमन िवभाग, क��ीय कायार्लय, क��ीय कायार्लय भवन, शहीद भगत �सह मागर्, मुंबई - 400001
Department of Regulation, Central Office, 13th floor, Central Office Building, Shahid Bhagat Singh Marg, Mumbai – 400 001
टेलीफोन /Tel No: 91-22-22601000 फैक्स /Fax No: 91-22-2270 1240 Email ID: cgmicdbr@rbi.org.inb) The phrase ‘paid-up equity capital’ in ‘Guidelines for Licensing of SFBs in Private
Sector - 2014’ means ‘paid-up voting equity capital’ (Reference: Response to query
number 104 of ‘Clarifications to queries on guidelines for licensing of Small Finance
Banks in the Private Sector’ dated January 1, 2015).
4. The provisions of this circular shall come into force with immediate effect.
Yours faithfully,
(Shrimohan Yadav)
Chief General Manager