Equitas Small Finance Bank commences operations

Equitas Small Finance Bank Limited has commenced operations as a small finance bank (SFB) from 5 September 2016 following receipt of a licence from the Reserve Bank of India (RBI) for carrying on the business of small finance bank in India.

On 16 September 2015, RBI had announced the in-principle approval to 10 applicants, including Equitas Holding Pvt Ltd, for setting up SFBs under the `Guidelines for Licensing of Small Finance Banks in the private sector' issued on 27 November 2014..

The ''in-principle'' approval granted is valid for 18 months within which applicants should comply with the requirements under the guidelines and fulfil other conditions as may be stipulated by the RBI. On being satisfied that the applicants have complied with the requisite conditions laid down by it as part of ''in-principle'' approval, the RBI would consider granting them a licence for commencement of banking business under Section 22(1) of the Banking Regulation Act, 1949.

Until a regular licence is issued, the applicants cannot undertake any banking business.

The selected applicants included:

  • Au Financiers (India) Ltd (Jaipur)
  • Capital Local Area Bank Ltd (Jalandhar)
  • Disha Microfin Private Ltd (Ahmedabad)
  • Equitas Holdings P Limited (Chennai)
  • ESAF Microfinance and Investments Private Ltd (Chennai)
  • Janalakshmi Financial Services Private Limited (Bengaluru)
  • RGVN (North East) Microfinance Limited (Guwahati)
  • Suryoday Micro Finance Private Ltd (Navi Mumbai)
  • Ujjivan Financial Services Private Ltd (Bengaluru)
  • Utkarsh Micro Finance Private Ltd (Varanasi)

RBI selected these applicants after three different committees contributing to the final decision, backed by detailed case study for each applicant.

In the union budget for 2014-2015 presented on 10 July 2014, finance minister Arun Jaitley had proposed licensing small banks.

''After making suitable changes to current framework, a structure will be put in place for continuous authorisation of universal banks in the private sector in the current financial year. RBI will create a framework for licensing small banks and other differentiated banks. Differentiated banks serving niche interests, local area banks, payment banks etc are contemplated to meet credit and remittance needs of small businesses, unorganised sector, low income households, farmers and migrant work force,'' jaitley stated in his budget speech.

Draft guidelines for licensing of small finance banks were released for public comments on 17 July 2014. Based on the comments and suggestions received on the draft guidelines, final guidelines for licensing of small finance banks were issued on 27 November 2014. The Reserve Bank also issued clarifications to the various queries on the guidelines on 1 January 2015.

RBI received 72 applications for small finance banks. Subsequently, Microsec Resources Private Limited, Kolkata withdrew its application, while in the case of an application made by a certain Ajay Singh Bimbhet and others, two of the co-promoters withdrew their candidature and thereby the application was deemed to have been withdrawn.