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Merger of Fincare Small Finance Bank With AU Small Finance Bank

Utkarsh Classes 31-10-2023
Merger of Fincare Small Finance Bank With AU Small Finance Bank Economy 7 min read

AU Small Finance Bank and Fincare Small Finance Bank have agreed to merge under Banking Regulation Act of 1949.

  • The merger is contingent on the approval of both banks' shareholders, as well as the Reserve Bank of India under the Banking Regulation Act and the Competition Commission of India. Once the necessary approvals are secured, Fincare Small Finance Bank will merge into AU Small Finance Bank.
  • Merger requires that both banks receive the approval of at least two-thirds of their respective shareholders before submitting the merger proposal to the RBI for final approval.

About AU Small Finance Bank

  • Mr. Sanjay Agarwal is promoter and Managing Director & CEO of the Bank.
  • AU Small Finance Bank is headquartered in Jaipur.
  • Its tagline is Chalo Aage Badhe.

About Small Finance Bank 

  • Small Finance Banks are a specific segment of banking in India created by RBI, under the guidance of the Government of India. 
  • The objective of Small Finance Banks is to further financial inclusion by extending basic banking services primarily to unserved and underserved sections, including small and marginal farmers, small business units, micro and small industries, and unorganized entities. 
  • These institutions offer all basic banking services, including lending and taking deposits. RBI issued the guidelines for Small Finance Banks in November 2014, following the announcement during the Union Budget for the year 2014-15. 
  • SFB was set up on the recommendation  of Raghuram Rajan headed “ High Level Committee on Financial Sector Reforms”. In its  2008 report titled “A Hundred Small Steps”. Jalandhar(Punjab) based Capital Small Finance  Bank (earlier Capital Local Area Bank ) became the first Small finance bank to start its operation. It commenced its operation in April 2016. At present there are 12 small finance banks operating in the country.
     

Working of Small Finance Banks 

  • Small Finance Banks act as savings vehicles and also offer credit facilities to small business units, micro and small industries, small and marginal farmers, and other unorganized sectors. 
  • They leverage advanced technology and low-cost operations to provide these services. The scope of activities included in the working of a Small Finance Bank primarily involves carrying out basic banking activities to serve unserved and underserved sections in India. 
  • While they can offer deposits and loan products, they are not permitted to set up subsidiaries to offer any non-banking financial services.

Under RBI

  • Small Finance Banks operate in India under the regulation of the RBI and fall under the purview of the apex bank's Banking Ombudsman Scheme. 
  • These banks are registered as public limited companies and are governed by the Companies Act, 2013, the Banking Regulations Act, 1949, RBI Act, 1934, and other relevant statutes and directives. The Banking Ombudsman Scheme, 2006, as amended from time to time, provides a framework for the banks to operate within.

Products and Services 

  • Small Finance Banks provide basic banking services including savings accounts, current accounts, fixed deposits, recurring deposits, loans, and more. Prior approval from the RBI and compliance with the necessary requirements are necessary for the banks to undertake such activities. 
  • These activities do not require any commitment of their own funds, and they can even engage in the distribution of mutual fund units, pension products, insurance products, etc. SFBs can also become authorized dealers in foreign exchange business as per their clients' needs.

Difference Between NBFC and Small Finance Bank

Parameters

NBFCs

SFBs

Meaning

Engaged in providing loans, acquiring bonds, and government securities.

 

Small Finance Banks are authorized by the government to provide basic banking facilities to underserved areas.

Regulated by

The Department of Non-Banking Supervision (DNBS) under Reserve Bank of India Act, 1934.

Banking Regulations Act, 1949; RBI Act, 1934.

Credit Creation

NBFCs also offer Credit facilities

SFBs offer Credit facilities

Demand Deposit

NBFCs do not accept demand deposits

Demand deposits are acceptable by SFBs

Transaction Services

Not offered

Offered by SFBs


Previous Merger of Bank

 

Acquirer Bank

Merged Bank

Punjab National Bank

Oriental Bank of Commerce

United Bank of India

Canara Bank

Syndicate Bank

Indian Bank

Allahabad Bank

Union Bank of India

Andhra Bank

Corporation Bank

Bank of Baroda

Dena Bank

Vijaya Bank

State Bank of India


 

State Bank of Bikaner and Jaipur

State Bank of Hyderabad

State Bank of Mysore

State Bank of Patiala

State Bank of Travancore

Bharatiya Mahila Bank

FAQ

Answer: Fincare Small Finance Bank

Answer: Banking Regulation Act of 1949.

Answer: Dena Bank, and Vijaya Bank

Answer: Savings accounts, current accounts, fixed deposits, recurring deposits, loans.
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