The Reserve Bank of India (RBI) has turned down the request from small finance banks (SFB) to drop the “small finance” tag from their name, saying that SFBs are differentiated banks with specific objectives like financial inclusion.
- SFBs had pointed out the challenges arising from the “small” nomenclature, which is associated with them.
- They said extending loans is not an issue, but depositors are at times wary of such a tag.
- Small Finance Banks in India are a specific segment of banking created by RBI, under the guidance of the Government of India.
- SFBs are niche banks with a minimum net worth of Rs 200 crore, lower than other scheduled commercial banks (SCBs).
- SFBs are required to lend at least 75 per cent of their adjusted net bank credit (ANBC) to priority sectors. This compares to 40 per cent in case of other SCBs.
- At least 50% of the loans given by a small finance bank should be of a value of less than Rs 25 lakhs.
- Meanwhile, as a step to enhance SFBs’ capacity to manage interest rate risks, RBI has allowed them to deal in rupee interest derivative products.
- Other services provided by a small finance bank are same as that of a universal commercial bank.
- They take deposits from the general public. They provide loans to the public. They give personal loans, business loans, gold loans etc. They provide remittance related services.
