Universal bank tag for SFBs: RBI opens window

AU SFB, a few others seen as contenders for conversion

- ABHIJIT LELE & AATHIRA VARIER

The Reserve Bank of India (RBI) on Friday came out with guidelines for the voluntary conversion of small finance banks (SFBS) into universal banks.

The "Guidelines for 'on-tap' Licensing of SFBS in Private Sector", dated December 5, 2019, provide a transition path for SFBs to become universal banks. "Such conversion shall be subject to the SFB's fulfilling minimum paid-up capital/net worth requirement as applicable to universal banks, satisfactory track record of performance as an SFB for a minimum period of five years, and the RBI's due diligence exercise," the banking regulator said a release, stating that these instructions are issued in exercise of the powers conferred on the RBI under Section 22 (1) of the Banking Regulation Act, 1949.

To be eligible for conversion into a universal bank, the RBI stipulates that only listed SFBS will qualify. Those intending to convert must have a minimum net worth of 1,000. crore. Also, the SFBS must have a scheduled status and a satisfactory track record of at least five years with a gross non-performing asset (NPA) of 3 percent or less and a net NPA of 1 percent or less in the past two financial years.