RBI rejects two applications for small finance bank

The Reserve Bank of India has rejected two more applications, including that of Dvara Kshetriya Gramin Financial Services, for setting up small finance banks. Earlier in July 2023, it had rejected three applications.

RBI had received about a dozen applications to set up banks under the guidelines for 'on tap' Licensing of Universal Banks and Small Finance Banks (SFBs).

The guidelines for 'on tap' licensing of Universal Banks and SFBs in the private sector were issued on August 1, 2016, and December 5, 2019, respectively.

In a statement on Friday, the RBI said the examination of two more applications for setting up a small finance bank has been completed as per the procedure laid down under extant guidelines.

Based on the assessment of the applications, the central bank said it did not find applicants -- Dvara Kshetriya Gramin Financial Services Private Limited and Tally Solutions Private Limited -- suitable for granting of in-principle approval to set up a small finance bank.

However, two remaining applications are still "under examination".

In May 2022, it announced the decisions on six applications.

In July last year, the RBI had rejected applications of Akhil Kumar Gupta, Cosmea Financial Holdings Pvt Ltd and West End Housing Finance Ltd.

As per the guidelines, the initial minimum paid-up voting equity capital for a universal bank should be Rs 500 crore. Thereafter, the bank should have a minimum net worth of Rs 500 crore at all times.

The minimum paid-up voting capital/net worth for SFBs should be Rs 200 crore.

In case of urban co-operative banks desirous of voluntarily transiting into SFBs, the initial requirement of net worth is Rs 100 crore, which will have to be increased to Rs 200 crore within five years.