The World Opinion

Tag: Small Finance Banks

  • AU Small Finance Bank Submits Application To RBI For Universal Bank Licence | Economy News

    New Delhi: AU Small Finance Bank (AUSFB) on Tuesday submitted an application to the RBI seeking approval for a universal bank licence. The RBI in April invited applications from small finance banks meeting specified criteria, including a minimum net worth of Rs 1,000 crore, for becoming regular or universal banks.

    AUSFB submitted an application to the central bank seeking approval for the voluntary transition from a small finance bank to a universal bank on September 3, 2024, the lender said in a BSE filing.

     

    In November 2014, the RBI issued guidelines for the licensing of small finance banks (SFBs) in the private sector. As per the April guidelines of RBI, an SFB aiming to become a universal bank should have a minimum net worth of Rs 1,000 crore at the end of the previous quarter and shares of the bank should have been listed on a recognised stock exchange.

    It should also have a net profit in the last two financial years and gross NPA and net NPA of less than or equal to 3 per cent and 1 per cent, respectively, in the last two financial years.

    Jaipur-based AUSFB acquired Fincare Small Finance Bank, and the merger became effective on April 1 this year. With the merger, the total business mix of the merged entity crossed Rs 1.8 lakh crore.  

  • Indian Small Finance Banks To Grow Their Advances 25-27 Per Cent This fiscal: Report | Economy News

    New Delhi: Segmental and geographical expansion, underpinned by a strong and increasing presence in semi-urban and rural markets with large unmet demand, will continue to drive growth for small finance banks (SFBs) in India this fiscal, a report showed on Monday. SFBs are expected to grow their advances by a robust 25-27 per cent this fiscal, according to a CRISIL Ratings report.

    These banks are approved by the Reserve Bank of India (RBI), to further financial inclusion by primarily extending basic banking services to unserved and underserved sections, which include small and marginal farmers, small business units, micro and small industries and unorganised entities.

    Amid challenges in mobilising deposits and their higher cost, SFBs are likely to explore alternative, non-deposit avenues to fund credit growth. That said, capital buffers to support growth remain healthy for SFBs, the report mentioned.

    “Credit growth in new asset classes is seen at 40 per cent this fiscal, while that in traditional segments will be 20 per cent. With this, the portfolio mix will continue to shift. The share of new segments would cross 40 per cent by March 2025, twice the March 2020 level,” said Ajit Velonie, senior director, CRISIL Ratings.

    Most of this diversification is towards secured asset classes, resulting in the share of secured lending rising, albeit at a moderate pace, he informed. The estimated credit growth can be divided into two segments — traditional and new, with the latter driving the momentum.

    The report mentioned that the constituents of new asset classes may vary across SFBs depending on their original segment focus, but would typically include mortgage loans, loans to MSMEs, vehicle loans and unsecured personal loans.

    In terms of geographical penetration, the SFB branch network more than doubled over the five years to 7,400. Deposit growth, at 30 per cent in fiscal 2024 outpaced credit growth, in contrast to the overall banking sector.

    “To optimise deposit mobilisation, the reliance on term deposits will continue, given the higher opportunity cost to maintain CASA balances for depositors in the current interest rate scenario,” the report said.

    According to Subha Sri Narayanan, Director, CRISIL Ratings, SFBs will need to explore alternative funding routes to balance growth and funding cost, especially given the growing share of lower-yielding secured assets. 

  • RBI Lays Out Criteria For Small Finance Banks To Achieve Universal Banks License

    The bank intending to transit must have their shares listed on a recognized stock exchange.