Despite new RBI rules, no small finance bank will apply for a universal banking licence anytime soon

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Also read: RBI sets standards for SFBs eyeing universal bank licence Uttam Tibrewal, executive director & deputy chief executive officer, AU SFB, said, “Prima facie it looks like we meet most of the criteria set out by the regulator. We are studying the circular in detail and will discuss the next course of action with our board soon. Currently, we are fully focused on ensuring a smooth integration with Fincare SFB and scaling our recently launched authorised dealer-I business of cross-border trade and forex for our customers." According to the RBI's guidelines, only listed SFBs can qualify for a universal banking license.

Those intending to convert must have a minimum net worth of ₹1,000 crore and a scheduled status with a satisfactory track record of at least five years. They should also have been profitable, with gross non-performing assets of less than 3% and net non-performing assets of less than 1% in the previous two financial years. They must also meet the prescribed capital adequacy requirements and provide a detailed rationale for their transition.

Bankers, however, said a diversified loan portfolio was the RBI's toughest condition. Banks such as Ujjvan SFB, Utkarsh SFB, Suryoday and ESAF have high exposure to microfinance loans, which will take at least two to three years to bring down. While Equitas SFB's loan book meets the diversification criteria, it reported an NNPA of 1.12% at the end of March 2024.