The Reserve Bank of India (RBI) has declined the applications submitted by West End Housing Finance and two other institutions to establish small finance banks.
In a statement, the RBI stated that these applications did not meet the eligibility criteria for obtaining in-principle approval to establish a small finance bank.
A total of 12 applications were received by the RBI for licenses under the ‘ever-accessible’ system, which includes both general banks and small finance banks.
Decision on Six Applications Made in May Last Year
Last year in May, the RBI reviewed and made decisions on six of the applications it received.
Recently, the RBI concluded the evaluation process for three applications seeking approval to open a Small Finance Bank.
Following the review, all three applications were found to be ineligible.
The applications were submitted by West End Housing Finance Limited, Cosmi Financial Holdings Private Limited, and Akhil Kumar Gupta.
Minimum Capital Requirements for Opening a Bank
The RBI emphasized that the examination of other applications for banking licenses is still ongoing.
The guidelines for granting licenses to private sector banks under the ‘Sada Sulabh’ regime were issued on August 1, 2016, while guidelines for Small Finance Banks were issued on December 5, 2019.
As per the guidelines, Universal Banks are required to have an initial minimum paid-up voting equity capital of Rs 500 crore, and they must maintain assets of at least Rs 500 crore at all times.
Small Finance Banks (SFBs) are required to have a minimum paid-up voting capital of Rs 200 crore.
Urban Co-operative Banks interested in applying for a banking license should have an initial capital of Rs 100 crore, which needs to be increased to Rs 200 crore within the next five years.