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  1. Race for small banks hots up as more players enter fray

Race for small banks hots up as more players enter fray

UAE Exchange India, Village Financial Services (VFS) and IIFL, among others...

By: and | Mumbai | Published: February 3, 2015 12:39 AM

UAE Exchange India, Village Financial Services (VFS) and IIFL, among others, said on Monday that they have sought RBI approval to set up small banks. The deadline for applying for a licence expired on Monday.

Foreign exchange and remmitance services provider UAE Exchange India, a part of the Global UAE Exchange Group, has applied for a small bank licence, it said on Monday. The firm has its services spread across 32 countries and is promoted by BR Shetty, CEO & MD of UAE Exchange Group.

UAE Exchange India has 390 direct offices in various states of India with around 4,000 direct employees and has a business correspondent network of around 6,629 individual agents. V George Antony, MD, India, said applying for a small bank licence and upgrading the company to a bank was only a natural extension from its present position.

Microfinance institution VFS also said it has applied to become a small finance bank. Kuldip Maity, MD & CEO, VFS, said microfinance was a crucial driving force in the process of financial inclusion.

Hyderabad-headquartered SKS said its board of directors has approved a proposal to apply for small finance bank licence. IIFL Holdings has also submitted an application to the RBI for a licence for setting up small finance bank.

THE RULES
* Initial capital requirement: R100 crore

* Eligibility: Entities and individuals must have 10 years of experience in finance and banking
1. Existing microfinance companies, NBFCs can convert into small banks
2. Large PSUs, industrial houses and NBFCs floated by them cannot apply

* Promoter contribution:

Initially must be 40%; to be brought down to 26% over 12 yrs

* Foreign holding: Up to 74% of paid-up capital, on a par with private banks
* Capital requirement: Minimum capital adequacy ratio 15% with minimum Tier-I capital of 7.5%
* Lending business: Restricted to small businesses, marginal farmers. Priority sector lending target 75%. 50% of loanbook must be of those up to R25 lakh
* Maximum exposure: For single borrower, limited to 10%; group exposure, limited to 15%

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