Source: BS
Context:
Fino Payments Bank Ltd. has received ‘in-principle’ approval from the Reserve Bank of India (RBI) to convert into a Small Finance Bank (SFB).
First Payments Bank to Secure SFB Conversion Nod
- Fino becomes the first-ever payments bank eligible for SFB transformation.
- Eligibility achieved after completing five years of operations, as mandated by RBI.
- Fino launched its payments bank services in 2017.
What Conversion to SFB Enables
After full authorization, Fino will be able to:
- Accept higher-value deposits without payments bank limits.
- Start lending activities to individuals, MSMEs, and small businesses.
- Offer loans such as microcredit, agri-loans, business loans, and retail loans.
- Expand branch network—25% must be in unbanked rural centres.
- Operate like mainstream commercial banks but with a focus on underserved segments.
Eligibility to Become a Small Finance Bank (SFB)
As per RBI’s “on-tap” licensing guidelines, the following criteria must be met:
1. Existing Entity Requirements
- Eligible applicants include:
- Existing Payments Banks,
- NBFCs,
- Microfinance Institutions (MFIs),
- Local area banks,
- And other resident-owned entities.
- The applicant must be promoted by residents (Indian citizens/companies).
- Foreign shareholding allowed up to 49% automatically, higher requires approval.
2. Operations & Compliance Track Record
- Payments banks must complete minimum 5 years of operations.
- Must show sound financials, profitability path, and clean compliance history.
3. Capital Requirements
- Minimum paid-up capital: ₹200 crore.
- Promoter must contribute at least 40% of the paid-up capital (to be diluted to 26% in 12 years).
- Minimum CRAR of 15% is required post-conversion.
4. Priority Sector & Financial Inclusion Focus
- At least 75% of Adjusted Net Bank Credit (ANBC) must be towards priority sectors.
- At least 50% of loans must be up to ₹25 lakh ticket size.
5. Branch Expansion Rules
- At least 25% of branches must be in unbanked rural centres.
