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Context
Small Finance Banks
Features
Objectives
The objective of small finance banks
How is Small Finance Bank different from Commercial Banks?
Small Finance Bank
Commercial Bank
In a nutshell,
Rules for Small Finance banks
Eligibility Criteria for Banks
Registration of SFBs
Norms of SFBs
FDI in SFBs
What will be their transition path?
A universal bank is a bank that combines the three main services of banking under one roof. The three services are wholesale banking, retail banking, and investment banking. In other words, it is a retail bank, a wholesale bank, and also an investment bank. |
SFBs in India
The operational SFBs in India are as follows:
Conclusion
Small Finance Bank Vs Payments Bank Vs Commercial Bank
Basis of Difference |
Small Finance Bank |
Payments Bank |
Commercial Bank |
Who can promote |
Individuals/ professional having 10 years experience in finance, NBFCs, microfinance companies, local area banks, etc. |
Can be promoted by Telecom Companies, Prepaid Card Issuers, NBFCs, Supermarket Chains, PSUs, etc. |
As per guidelines issued by RBI |
Promoter's Share |
40% in starting Then can be gradually brought down to 26% in 12 years |
40 % for first Five 5 years from the date of commencement of business |
As per guidelines issued by RBI |
Capital Required |
Minimum Paid Up capital should be 100 Crores |
Minimum Paid Up capital should be 100 Crores |
Commercial banks have enormous amounts of capital. |
Regulatory Requirements |
Meet CRR and SLR set by the RBI |
Meet CRR and SLR set by the RBI |
Meet CRR and SLR set by the RBI |
Customer Reach |
Customers are reached through its branches |
Customers are reached through Mobile banks |
Customers are reached through its branches |
Demand Deposit |
Can accept demand deposit like savings deposit without any fixed limit |
Can accept demand deposit like savings deposit only upto Rs. 1 lakh |
Can accept deposit without any fixed limit |
Time Deposit |
Can accept Time Deposit such as Fixed Deposit and Recurring Deposit |
Can't accept Time Deposit such as Fixed Deposit and Recurring Deposit |
Can accept Time Deposit such as Fixed Deposit and Recurring Deposit |
Loan |
Can offer loan. Must extend 75% loans to priority sectors |
Cannot offer loan |
Can offer loan to its customers |
Remittance Services |
Can provide Remittance Services |
Can provide Remittance Services |
Can provide Remittance Services |
Online Banking Solutions |
Can offer online banking services |
Can offer online banking services such as bill payment, etc. |
Can offer online banking services |
Revenue |
Earns revenue through leding services |
Earns revenue through transaction charges and fee income for remittances |
Earns revenue through leding services, transaction charges, etc. |
Debit Card |
Can issue Debit Card and ATM Card |
Can issue Debit Card and ATM Card |
Can issue Debit Card and ATM Card |
Credit Card |
Can issue credit cards |
Can't issue credit cards |
Can issue Credit Card |
Target Customers |
MSME, Small Farmers, Small Businessman, Unorganized Workers, etc. |
Poor migrant labourers, unbanked Indians, under-banked customers, low-income households and small businesses |
Not restricted to any region |
Forex Services |
Can provide Forex Services and can charge less than commercial bank for these products |
Can provide foreign exchange services, however, different banks charges are different for these services |
|
Adoption of Technology |
Should be fully technology driven right from the beginning |
Should be fully technology driven right from the beginning |
Gradually implementing latest technology like online transactions, mobile banking, etc. |
Branches |
For Initial 3 years, 25% branches must be in rural areas to tap those areas |
Must have 25% branches in rural areas |
Can open branches anywhere in India |
Third Party Products |
Can sell third party products like mutual funds, indurance, pension products, etc. |
Can sell third party products like mutual funds, indurance, pension products, etc. |
Can sell third party products like mutual funds, indurance, pension products, etc. |
Read:
Microfinance Institutions:
https://www.iasgyan.in/daily-current-affairs/microfinance-institutions-mfis
Cooperative Banks:
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