Small finance banks wish to shed "small" tag, wait for RBI signal to seek universal license
Small finance banks such as AU, Equitas and Ujjivan, which aspire to become "universal banks" as they complete the mandatory five-year cooling off period, are now awaiting the regulator’s signal before they officially seek licence upgrades.
Although these banks have almost every product in their suite for the retail customer, they would prefer to drop the ‘small bank’ tags attached to their names and be in the same league with others to win over stakeholders, particularly depositors.
Some of these so-called small banks are already bigger in size than quite a few old-generation private sector lenders, while a universal bank licence would test their skills on underwriting and bandwidth to handle bigger businesses.
The licensing window for universal banks is open on-tap, which means that the applications can be submitted to the regulator any time. However, as things stand now, there is no specific communication from the Reserve Bank of India (RBI) on conversion of small finance banks into a universal lender, which would allow the current set of ‘small’ lenders more flexibility in the way they do business and leverage capital.
Most importantly, captains of every small bank highlighted that the ‘small’ tag is hurting them in the perception game.
