Are you ready for Variety of choices in financial Inclusion?
Reserve Bank of India provides the opportunity for customers by 10 shortlisted microlenders to set up small banks to advance loans primarily to the small businesses, farmers, micro and small industries and unorganized sector entities which do not have access to finance from the larger banks.
Small finance banks are similar to regular commercial banks except that their scale of services will be much smaller.
These new type of banks should generate
- At least 75% of their business from the priority sector (largely agriculture)
- Mainly from areas where large banks are not present.
- 50% of their loans should be of ticket sizes under Rs 25 lakh
With the goal to reach the rural customers who are deprived of the services provided by the larger banks, microbanks provide them those services so that they are able to improve their livelihood and also they assist them to use govt. financial services, that they are unaware of.
Guidelines to be met by small finance banks:
- 75 percent of Adjusted Net Bank Credit to be extended to priority sector.
- 50 percent of loan portfolio to constitute loans & advances of up to Rs 25 lakh
- 25 percent of branches must be in rural areas where there are no banks
- Maximum loan size & investment limit to single obligor and Group restricted to 10 percent of capital funds.
- Require minimum paid up equity capital of Rs 100 crore.
- Promoter stake must be at 40 percent in first 5 years
- Promoter stake to be brought down to 30 percent within 10 yrs and 26 percent in 12 years
- Listing to be mandatory within 3 years of reaching Rs. 500 crore net worth
- Maximum foreign shareholding of 74 percent allowed
- CRR, SLR requirement as applicable to existing commercial banks from Day 1
These banks thus will add a much-needed financial inclusion dimension to the banking system. Over the next decade or so their functioning has the potential to bring about another revolution in the banking sector.