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Small finance banks (SFBs) will be allowed exemption from the existing regulatory ceiling on inter-bank borrowings till the existing loans mature or up to a period of three years, whichever is earlier, according to the operating guidelines issued by the Reserve Bank of India.
Thereafter, SFBs’ inter-bank borrowings will be on par with scheduled commercial banks. In this context, the RBI clarified that the borrowings made by the SFB after commencement of operations will be subject to inter-bank borrowing limits.
The exemption from the existing regulatory ceiling on inter-bank borrowings is only applicable to the legacy borrowings that are migrated to the opening balance sheet of the SFB on the day of commencement of an SFB’s operations.
The RBI said SFBs are permitted to purchase portfolios of loans classified as standard assets only from banks and NBFCs for the specific purpose of meeting the sub-targets within the 40 per cent priority sector lending target as applicable to commercial banks. They are not permitted to purchase non-performing loans.
The SFBs may engage all permitted entities, including the companies owned by their business partners and own group companies, on arm’s length basis as business correspondents.
These companies can have their own branches managed by their employees operating as “access points” or may engage other entities/persons to manage the “access points” which could be managed by the latter’s staff.
According to the operating guidelines, SFBs may, at their discretion, issue passbooks for the deposit accounts; they should give written/printed proof of the first time deposit, in addition to the electronic confirmation of the deposit. These banks should send a statement of accounts once every six months to the registered address free of cost, if passbooks have not been issued. They may provide the statement of accounts in paper form on request on chargeable basis or otherwise, if passbooks have not been issued.
SFBs may provide account information through multiple user-friendly modes, such as SMS and/or Internet banking; and they should provide electronic confirmation through SMS/e-mail/printed proof for each account transaction.
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