Financial Inclusion

Small Finance Bank Licenses issued to 8 companies by RBI

The Reserve Bank of India announced today that it has granted provisional “in principle licenses” to ten different financial entities to launch payment banks in India called Small Finance Banks. Out of the ten companies granted small finance bank licenses, 8 operate in the microfinance sector.

The approval granted today is valid for 18 months during which the selected applicants are required to comply with the minimum capital requirements, foreign shareholding, scope of activities and other guidelines as announced by the RBI last year.

small banks license companies

  1. Au Financiers India Ltd – A Jaipur based NBFC which currently provides financing for cars and heavy vehicles in the state of Rajasthan. http://www.aufin.in
  2. Capital Local Area Bank Ltd – A Jalandhar based Local Area Bank having operations in the state of Punjab. http://www.capitalbank.co.in
  3. Disha Microfin Pvt Ltd – A MFI headquartered in Ahmedabad and having microfinance operations predominantly in the West of India. http://www.dishamicrofin.com
  4. Equitas Holdings Pvt Ltd – A diversified microfinance company with headquarters in Chennai and having operations in microfinance and micro-housing loans. http://www.equitas.in
  5. ESAF MicrofinanceThe Kerala focused MFI has it’s headquarters in Chennai and has done pioneering work in the state of Tamil Nadu. http://emfil.org
  6. Janalakshmi Financial Services Pvt Ltd, Headquartered in Bangalore, Janalakshmi is one of India’s largest microfinance companies.http://www.janalakshmi.com
  7. RGVN North East Microfinance Ltd is a MFI based in North East India with it’s headquarters in  Guwahati, Assam. http://www.rgvnnemfl.com
  8. Suryoday Microfinance Pvt Ltd is a MFI based in Mumbai with operations in Maharashtra, Gujarat and Orissa. http://suryodaymf.com
  9. Ujjivan Financial Services Pvt LtdA Bangalore based MFI and one of the first microfinance companies to scale up operations in urban India. – http://www.ujjivan.com
  10. Utkarsh Microfinance Pvt Ltd with headquarters in Varanasi and operations spread across the states of Uttar Pradesh – http://www.utkarshmfi.com

None of the companies granted new licenses are currently listed on the stock exchanges of India. India’s first microfinance company that went public, SKS microfinance has been denied a license despite being one of the early applicants.

History of Small Finance Banks in India

Small Finance Banks are a new category of Banks announced by the RBI in July 2014, when the draft guidelines for small finance banks was made public.  By February 2015, RBI had received applications from 72 applicants and an external advisory committee headed by Usha Thorat was constituted to evaluate the applicants. The 10 companies that received licenses today come from this group of applicants. It is expected that RBI will grant licenses to more companies in the coming weeks and applications will henceforth be evaluated on a rolling basis.

Benefits of Small Finance Bank Licenses

Small Finance Banks licenses are more restrictive than a regular bank license, such as one given to State Bank of India (SBI) or ICICI Bank. While small finance banks can undertake fundamental banking activities such as deposit taking and lending, they are not allowed to set up subsidiaries. Also the loan ticket size is much smaller in Small Finance Banks compared to regular banks. RBI has mandated that the activities of promoters of small finance banks should not be mixed with banking operations.

Lobbying by MFIN opens new avenues for Microfinance Companies

The apex association of microfinance companies in India, MFIN has played a very crucial role in ensuring that the NBFC-MFIs have a level playing field through it’s continuous engagement with the RBI. It was through sustained efforts of MFIN and MFI-NBFC’s that RBI opened up its small finance bank application process to MFI’s who had pan-India operations as against those which operated only in one state and two contiguous districts.

MFIN also played a crucial role in the renaming of Small Banks as Small Finance Banks. The essence being, that it’s not the Bank that should be small but the loan amount, which addresses a large unmet need of the micro-enterprise sector.

3 Comments

3 Comments

  1. Bhesaneeya Bharat B

    October 1, 2015 at 2:44 pm

    job

  2. Prashanth hulumani

    October 18, 2015 at 12:25 pm

    Hello Gentlemen
    This is Prashanth here from bangalore having a sound experoence of 20 years as a DSA in banking sector promoting credit cards,personal loans,home loans,mortgages,etc….. My last job was with a delhi based pan india financial distribution company as AVP and i wish to diversify my platform to micro finance industry if the suitable opportunity is given to drive the success which is not just in words. I have been recognized as a star performer in leading financial institutions and wants to get associated in a place where my presence needed. Contact if really interested.

  3. subash mudi

    May 8, 2016 at 1:57 pm

    Hi, this is great experience for me in mfi.I am so happy to see my life’s first mfi is listed as bank .

Leave a Reply

Your email address will not be published. Required fields are marked *

To Top