RBI Update – Voluntary transition of Small Finance Banks to Universal Banks

This circular is applicable to all Small Finance Banks.

Provisions

With the objective of bringing better clarity, the eligibility criteria for an SFB to transition into a Universal bank will now be as follows:

1. scheduled status with a satisfactory track record of performance for a minimum period of five years;

2. shares of the bank should have been listed on a recognised stock exchange;

3. having a minimum net worth of ₹1,000 crore as at the end of the previous quarter (audited);

4. meeting the prescribed CRAR requirements for SFBs;

5. having a net profit in the last two financial years; and

6. having GNPA and NNPA of less than or equal to 3 percent and 1 percent respectively in the last two financial years.

The following conditions shall be applicable with regard to shareholding pattern:

1. There is no mandatory requirement for an eligible SFB to have an identified promoter. However, the existing promoters of the eligible SFB, if any, shall continue as the promoters on transition to Universal Bank.

2. Addition of new promoters or change in promoters shall not be permitted for an eligible SFB while transitioning to Universal Bank.

3. There shall be no new mandatory lock-in requirement of minimum shareholding for existing promoters in the transitioned Universal Bank.

4. There shall be no change to the promoter shareholding dilution plan already approved by the Reserve Bank.

5. The eligible SFBs having diversified loan portfolios will be preferred.