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Reserve Bank of India on Wednesday notified that Jalandhar-based Capital Small Finance Bank commenced its operations as a small finance bank with effect from April 24. The RBI issued a licence to the bank under Section 22(1) of the Banking Regulation Act, 1949, to carry on the business of small finance bank (SFB) in India. It is the first SFB to start banking operations. The Capital Small Finance Bank has been set up by converting the erstwhile Capital Local Area Bank.
Capital Local Area Bank was one of the 10 applicants to be given in-principle approval for setting up SFBs in September 2015.
According to RBI’s prudential norms for SFBs, Capital Small Finance Bank will be required to extend 75 per cent of its adjusted net bank credit to the sectors eligible for classification as priority sector lending. Further, at least 50 per cent of its loan portfolio should constitute loans and advances of up to ₹25 lakh.
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