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RBI open on Tap Licensing for SFB Bank

Utkarsh Classes Last Updated 27-04-2024
RBI open on Tap Licensing for SFB Bank Economy 7 min read

The Reserve Bank of India (RBI) has allowed the Small Finance Banks (SFB) to apply for Universal Bank licenses as per the on tap licensing norms of the RBI. The SFBs can apply for a universal bank license after fulfilling the norms laid by the RBI.

RBI Criteria for SFB to become a Universal Bank 

The RBI has laid down criteria for the SFB transition into a Universal bank as  follows:

  1. a minimum five-year satisfactory performance track record;
  2. shares of the banks have to be listed on a recognised stock exchange;
  3. a minimum net worth of Rs 1,000 crore at the end of the previous quarter;
  4. shall have the prescribed Capital to Risk-Weighted Ratio (CRAR);
  5. having a net profit in the last two financial years and
  6. having gross non-performing assets of less than or equal to 3 per cent and net non-performing assets of less than or equal to 1 per cent in the last two financial years.

On Tap Licensing 

RBI provides licenses to the banks in India under the Banking Regulation Act 1949. When RBI started granting licenses to the new private sector banks in 1993, it followed the Stop and Go model. 

Under this model RBI announced a time frame within which any eligible entity can apply for banking licence . If any eligible entity applied for licence after the expiry of the time period then it was not entertained by the RBI .

The stop and go licensing model was abandoned by the RBI and it was replaced with a ‘continuous authorisation’ policy in 2016, with a view to increasing the level of competition in the banking system.

RBI  issued detailed guidelines for ‘on tap’ licensing of Small Finance Banks into universal banks in 2019.

Under the on tap policy any eligible entity can apply at any time for banking licence to RBI . The window for application is open  all year round .

Universal Bank 

The Universal Bank is a type of financial institution which provides all types of  financial service under one roof to all types of customers. It provides retail banking (focussed on individual customers), wholesale banking (focused on companies and government) and investment  banking .

It is different from differentiated or Niche Banks as they function in a niche segment.

A niche is defined as a small target group which has a specialised needs/requirement. 

The differentiation could be on account of the area of operations, its product profile or scope of activities.

They may offer a limited range of specialised services /products or functions  to a specific group of customers In India Local Area Bank, Regional Rural Banks, Primary Urban Cooperative Banks,Payment Banks and Small Finance Banks can be considered as niche banks .

Small Finance Bank 

Raghuram Rajan headed the “High-Level Committee on Financial Sector Reforms” in its  2008 report titled “A Hundred Small Steps” and recommended the setting up of a Small Finance Bank to promote financial inclusion. 

The first Small Finance Bank to be set up in India was the Capital Small Finance Bank (earlier Capital Local Area Bank ). The Capital Small Finance Bank started its banking operation in April 2016.

The main objective of setting up small finance banks is to further financial inclusion. They were to provide the following services; 

(i) provision of savings facilities, and 

(ii) supply of credit to small business units, small and marginal farmers, micro and small industries; and other unorganised sector entities through the use of high technology and low-cost operations. 

At present, there are 12 Small Finance Banks operating in the country.

Serial No.

Small Finance Bank



Capital Small Finance Bank



AU Small Finance Bank



Equitas Small Finance Bank



SuryodaySmall Finance Bank



Ujjivan Small Finance Bank



Utkarsh Small Finance Bank



ESAF Small Finance Bank



Fincare Small Finance Bank



Jana Small Finance Bank



North East Small Finance Bank



Shivalik Small Finance Bank



Unity Small Finance Bank

New Delhi


Answer: Capital Small Finance Bank

Answer: Twelve

Answer: Raghuram Rajan headed the “High-Level Committee on Financial Sector Reforms” in 2008.
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