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As per RBI, 75% of the credit given out by small finance banks will need to go to sectors that are considered part of so-called priority sector lending. At present, banks have to lend 40% of their net bank credit to sectors such as agriculture, small enterprises and weaker sections of the society.
Small finance banks will also have to ensure that 50% of their loan portfolio constitutes advances up to Rs 25 lakh, said RBI.
Such banks can eventually apply to RBI to transit into universal banks once they have established a satisfactory track record. Such a transition would be subject to due diligence from the banking regulator.
The minimum paid-up equity capital for small finance banks was set at Rs 100 crore and the minimum initial contribution from promoters for fixed at 40%. Foreign shareholding in small finance banks would be as per the foreign direct investment (FDI) policy for private sector banks, said RBI.
Currently, foreign investors are allowed to invest up to 74% in private banks.
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