The Economic Times
English EditionEnglish Editionहिन्दी
| E-Paper
Search
+

    Guidelines likely to be eased for payments banks eyeing SFB status

    Synopsis

    The internal working group has suggested that the payment banks be allowed to convert to SFBs after three successful years of operation instead of the current stipulation of at least five years.

    Getty Images
    A central working group has recommended the easing of licensing norms for payments banks aspiring to convert into small finance banks (SFB), a move which could open up new avenues for a handful of such entities including those promoted by Paytm, Fino, and Bharti Airtel.

    The internal working group has suggested that the payment banks be allowed to convert to SFBs after three successful years of operation instead of the current stipulation of at least five years.

    “For those PBs intending to convert into an SFB, a track record of 3 years of experience as PB may be sufficient as in any case, the promoter had experience prior to setting up the PB which was taken into account while granting of licence,” said the five-member panel headed by P.K. Mohanty, Director, Central Board of RBI.

    The central bank committee has also batted for an extended timeline for the listing of small finance banks, arguing that the current rule which stipulates such banks be listed within three years of reaching Rs 500 crore net worth could hasten the process.

    As per the recommendation, SFBs’ mandatory listing timeline should be made similar to the universal banks. SFBs can be listed within six years from the date of reaching net worth of Rs 500 crore or ‘ten years from the date of commencement of operations’, whichever is earlier, the committee said.

    “The experts generally agreed that rushing the listing timelines will result in the management of the new banks having to devote disproportionate attention to listing requirements during the initial years of operations rather than the operations of the bank itself,” according to the committee report.

    Out of 10 SFBs, AU SFB and Ujjivan SFB are listed. Meanwhile, none of the local area banks and PBs have gone public yet. The prominent payment banks in India include Paytm Payments Bank, Fino PB, Airtel PB and Jio PB.

    Payment Banks are entities that can accept a restricted deposit, which is currently limited to ₹100,000 per customer. These banks, however, cannot issue loans and credit cards. Small Finance Banks on the other hand are retail-oriented banks which can lend and take deposits, subject to regulations.

    Also Read

    The Economic Times