The Reserve Bank of India (RBI) recently made a decision to reject applications from West End Housing Finance and two other institutions seeking approval to open small finance banks.
In a statement, the RBI clarified that these applications did not meet the eligibility criteria for in-principle approval required to establish a small finance bank.
Around 12 applications were received by the RBI for licenses under the ‘ever-accessible’ system for both general banks and small finance banks.
Decision on Six Applications to be Announced Soon
Among the applications received last year in May, the RBI had already made a decision on six of them.
Currently, the RBI has completed its review process for three additional applications submitted for approval to open Small Finance Banks.
Unfortunately, all three of these applications, filed by West End Housing Finance Limited, Cosmi Financial Holdings Private Limited, and Akhil Kumar Gupta, were deemed ineligible.
Minimum Capital Requirements for Bank Openings
According to the guidelines set by the RBI, the initial minimum paid-up voting equity capital for Universal Banks must be at least Rs 500 crore, with the bank required to maintain assets of at least Rs 500 crore at all times.
For Small Finance Banks (SFBs), the minimum paid-up voting capital should be Rs 200 crore.
As for Urban Co-operative Banks, the initial capital requirement is Rs 100 crore, with a subsequent increase to Rs 200 crore within the next five years.
Ongoing Evaluation of Other Bank License Applications
The RBI is currently conducting an evaluation of the remaining applications for banking licenses.
The guidelines for granting licenses to the private sector for general banking were issued on August 1, 2016, under the ‘Sada Sulabh’ regime.
Subsequently, guidelines specific to Small Finance Banks were issued on December 5, 2019.
The RBI continues its diligent assessment of these applications to ensure the highest standards are met for the establishment of new banks in the country.
