About Small Finance Banks

• The small finance banks (SFB) primarily undertake basic banking activities of acceptance of deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities.
• There are no restrictions in the area of operations of small finance banks.
• The small finance banks are subject to all prudential norms and regulations of RBI as applicable to existing commercial banks including requirement of maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
• The small finance banks will be required to extend 75 per cent of its Adjusted Net Bank Credit (ANBC) to the sectors eligible for classification as priority sector lending (PSL) by the Reserve Bank.
• At least 50 per cent of its loan portfolio should constitute loans and advances of upto Rs. 25 lakh.
• They are eligible to provide credit card and debit card facilities and associational services.

Why in News?

• The RBI has granted in-principle approval to two private entities to set up a Small Finance Banks.

Reference:

1. https://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=3764