Synopsis: The Reserve Bank of India (RBI) has rejected two more applications, including one from Dvara Kshetriya Gramin Financial Services, for establishing small finance banks.
The Reserve Bank of India (RBI) has declined two additional applications, including one from Dvara Kshetriya Gramin Financial Services, to establish small finance banks. This decision follows the rejection of three applications in July 2023.
RBI had received approximately twelve applications for bank establishment under the 'on tap' Licensing of Universal Banks and Small Finance Banks (SFBs) guidelines. These guidelines were issued on August 1, 2016, and December 5, 2019, for private sector entities.
In a statement on Friday, RBI stated that the examination of two more applications for setting up a small finance bank has been completed as per the existing guidelines. After evaluating the applications, the central bank deemed Dvara Kshetriya Gramin Financial Services Private Limited and Tally Solutions Private Limited unsuitable for the granting of in-principle approval to establish a small finance bank. However, two remaining applications are still under review.
Earlier, in May 2022, RBI announced decisions on six applications. Furthermore, in July of the previous year, RBI had rejected applications from Akhil Kumar Gupta, Cosmea Financial Holdings Pvt Ltd, and West End Housing Finance Ltd.
According to the guidelines, the initial minimum paid-up voting equity capital for a universal bank should be Rs 500 crore, with a minimum net worth of Rs 500 crore at all times. Similarly, the minimum paid-up voting capital/net worth for SFBs should be Rs 200 crore.
For urban co-operative banks transitioning into SFBs, the initial net worth requirement is Rs 100 crore, which must be increased to Rs 200 crore within five years.
In conclusion, the Reserve Bank of India's rejection of two more applications, including that of Dvara Kshetriya Gramin Financial Services, for setting up small finance banks underscores the stringent evaluation process in place for banking licenses. With a total of five rejections since July 2023, the RBI continues to uphold its standards outlined in the guidelines for 'on tap' licensing of Universal Banks and Small Finance Banks. While some applications are still under review, the central bank's emphasis on minimum capital requirements and financial stability reflects its commitment to ensuring the soundness of India's banking sector.
