Reserve Bank of India issued a circular No. RBI/2024-25/28DOR.LIC. REC. 20/16.13.218/2024-25 dated 26.04.2024 for Small Finance Banks as Voluntary Transition of Small Finance Banks to Universal Banks, which provides a tr

CS Professional · Banking and Insurance - Laws and Practice · PYQS · December 2024
Reserve Bank of India issued a circular No. RBI/2024-25/28DOR.LIC. REC. 20/16.13.218/2024-25 dated 26.04.2024 for Small Finance Banks as Voluntary Transition of Small Finance Banks to Universal Banks, which provides a transition path for Small Finance Banks (SFBs) to convert into 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 and RBI's due diligence exercise. These instructions are issued in exercise of the powers conferred on the Reserve Bank of India under Section 22(1) of the Banking Regulation Act, 1949. What is the eligibility criteria for an SFB to transition into a Universal bank as per this circular?

Answer & Explanation:

With the objective of bringing better clarity, the eligibility criteria for a Small Finance Bank (SFB) to transition into a Universal Bank are as follows: Scheduled status with a satisfactory track record of performance for a minimum period of five years. Shares of the bank should have been listed on a recognized stock exchange. Have a minimum net worth of ₹1,000 crore as at the end of the previous quarter (audited). Meeting the prescribed Capital to Risk-weighted Asset Ratio (CRAR) requirements for SFBs. Having a net profit in the last two financial years. Having Gross Non-Performing Assets (GNPA) and Net Non-Performing Assets (NNPA) of less than or equal to 3 percent and 1 percent respectively in the last two financial years.

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