New Delhi: All scheduled small financing banks (SFBs) will be eligible for an Authorized Dealer Category-I licence once they have operated as Authorised Dealer Category-II for at least years. These lenders will be allowed to offer more currency products to their clients.
The Reserve Bank of India announced the move so as to give more flexibility to small finance banks. “With the objective of giving more flexibility to SFBs to meet their customers’ foreign exchange business requirement, it has been decided that all the scheduled SFBs, after completion of at least two years of operations as Authorised Dealer Category-II, will be eligible for Authorised Dealer Category-I license, subject to compliance with prescribed eligibility norms” the central bank said in a notification.
The SFBs will be permitted to engage in all other foreign exchange transactions, such as bills of exchange, checks, letters of credit, deposits, etc., as a Category-I authorised dealer. On the other side, the bank will be limited to providing just money-changing services as a Category-II Authorized Dealer.
Eligibility criteria
The small finance bank must have a minimum net worth of Rs 500 crore in order to qualify for the same. Additionally, the capital adequacy ratio, commonly referred to as the capital-to-risk weighted assets ratio (CRAR), should not be lower than 15%.
Furthermore, throughout the previous four quarters, the small credit lender’s net non-performing assets could not have exceeded 6%. It shouldn’t have fallen behind on CRR/SLR maintenance over the past two years.
The SFB should also have recorded profit in the two years prior and should not have any significant regulatory or supervisory difficulties, among other reasons. The lender should also have operated as an Authorised Dealer Category-II for at least two years.
