Small Banks in India: Banking Awareness Special Series

Team Adda247 and Bankers Adda have introduced a Special Banking Awareness series for SBI and IBPS Interviews 2021. In this series, we will be introducing the candidates with some banking awareness topics  On a daily basis that will improve their general awareness and will also ensure that the candidates do not lack in any banking term when it comes to the interview round. Today the topic of our Banking Awareness Series is Small Banks in India.

Small Banks in India

Definition and Objective: Banks with a small finance bank license can provide basic banking services of acceptance of deposits and lending. The objective behind setting up small banks in India is to serve the sections of the society which are underserved or un-served and provide credit to small business units, small and marginal farmers, and other unorganized sectors. 

Registration, regulation, and equity capital: The small finance bank shall be registered under the Companies Act, 2013. It is licensed under section 22 of the Banking Regulation Act, 1949. The minimum paid-up capital required to set up a small finance bank is Rs.200 crore and it will be required to maintain a capital adequacy ratio of 15 percent of its risk-weighted assets. The promoters have to contribute an initial 40 percent of paid-up equity capital.  According to FDI policy foreign investors can invest in small finance banks up to 74 percent of equity capital (49 percent from direct route and other from approval route). 

Some operating small finance banks in India: