BANK : Reserve Bank of India Act, 1934

 🔆 SMALL FINANCE BANK 

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1. Committee of recommendations- USHA THORAT   

2. Licensed under Section 22 of the Banking Regulation Act,1949. 

3. Existing non-banking financial companies (NBFC), microfinance 

institutions (MFI) and local area banks (LAB) can apply to become 

small finance banks.  

4. They can be promoted either by individuals, corporate, trusts or 

societies.

5. They are established as public limited companies in the private sector under the Companies Act, 2013. 

6. Subject to Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) required.

7. The payment banks can apply for conversion into SFB after 5 years of operations if they are eligible as per guidelines.

8. Microfinance – Collateral-free loan given to a household having annual income of up to Rs. 3 lakh and the banks will not be restricted to any region.  

9.They were set up with the twin objectives of providing an institutional mechanism for promoting rural and semi urban savings and for providing credit for viable economic activities in the local areas.  

10. 75% of its net credits should be in priority sector lending. 

11. 50% of the loans in its portfolio must less than ₹25 lakh.

12. The firms must have a capital of at least ₹300 crore  

13. The promoters should have 10 years experience in banking and finance.  

14. If the initial shareholding by promoters in the bank is in excess of 40% of paid-up voting equity capital, it should be brought down to 40% within a period of 5 years, down to 30% in the first 10 years and finally 26% in 12 years.  

15. Joint ventures are not permitted.  

16. Foreign share holding will be allowed in these banks as per the rules for FDI in private banks in India. 

17. FDI limit in Private Sector Banks is 74 per cent.

18. At net worth of ₹500 crore,listing will be mandatory within 3 years.  

19. Small finance banks having net worth of below ₹500 crore could also get their shares listed voluntarily. 

20. At least 25 per cent of its branches in unbanked rural centres. 

21. SFBs are required to maintain minimum capital adequacy ratio(CAR) of 15 per cent against only 9 per cent for universal banks.  

22.Tier I capital should be at least 7.5 per cent of RWAs.

23. Maximum loan size to a single person cannot exceed 10% of total capital funds. 

24.Maximum loan size cannot exceed 15% of total capital funds in the case of a group.

▪️List of Small Finance Banks (SFB)

1. Au SFB

2. Capital SFB -1st SFB Started operation at 2016

3. Fincare SFB

4. Equitas SFB

5. ESAF SFB

6. Suryoday SFB

7. Ujjivan SFB

8. Utkarsh SFB

9. North East SFB

10. Jana SFB

11. Shivalik SBF

12. Unity SFB-12th

▪️AU SFB 

●Founded-1996

●HQ- Jaipur Rajasthan

●Licensed- 19april,2017

●MD & CEO-Sanjay Agarwal

●Tagline- Chalo AAgey badhey.

▪️Capital SFB

●Founded-2000

●HQ- Jalandhar,Punjab

●Licensed-Sept,2016

●MD & CEO- Sarvjit Sharma

●Tagline- Vishwas se vikas Tak

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●Reserve Bank of India was first enacted by parliament on 6 March 1934. In the beginning of 18 Th century, the joint – stock banking has been associated with the agency houses for the purpose of doing banking business. Indigenous bankers, nidhis, money lenders were acted as bankers. However, the growth of joint – stock banking with the help of agency houses leads to regulating the rules and regulation which was governing them as an act. So the need for the central banking system in India arose in 1773. However, it was the Hilton Young committee in 1926 recommended the establishment of a central bank in India. Therefore, it took 7 years to pass the RBI act 1934 as a shareholders banks. Finally, a number of banking companies were registered under the companies’ act 1956 and The RBI act 1934 for the purpose of protecting interests of the depositors’, ensuring control over the credit, develop banking on good lines and avoiding bank failures.

▪️There are total 61 Sections in the RBI Act 1934.

▪️Important Sections in the RBI Act 1934

●Section 3: Establishment and incorporation of Reserve Bank.

●Section 4: Capital of the Bank. The capital of the Bank shall be five crores of rupees.

●Section 6: Establishment of Offices, branches and agencies

●Section 8: The composition of central board of Reserve Bank of India

●Section 17: The business that RBI can carry out

●Section 20: Obligation of the Bank to transact Government business.  

●Section 21: Bank to have the right to transact Government business in India.

●Section 21A: Bank to transact Government business of States on agreement.

●Section 22: Right to issue bank notes.

●Section 24: Denominations of notes. (1) Subject to the provisions of sub-section (2), bank notes shall be of the denominational values of two rupees, five rupees, ten rupees, twenty rupees, fifty rupees, one hundred rupees, five hundred rupees, one thousand rupees, five thousand rupees and ten thousand rupees or of such other denominational values, not exceeding ten thousand rupees.

●Section 27: Re-issue of notes. The Bank shall not re-issue bank notes which are torn, defaced or excessively soiled.

●Section 26 (1): Defines legal tender of notes

●Section 26(2): Withdrawal of legal tender of notes

●Section 42: Cash reserves of scheduled banks to be kept with the Bank.

●Section 45(U): Defines repo, reverse repo, derivative, money market instruments and securities.

●The first schedule of the RBI Act 1934 defines the 4 areas under which the Indian states should come. The 4 areas are Western Area, Eastern Area, Northern Area, Southern Area

●The second schedule of the Act lists all the SCHEDULED BANKS in India.

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