India changes criteria for small banks seeking to be universal banks

Net worth lowered, but must be profitable in the past two years.

The Reserve Bank of India (RBI) has made changes to the eligibility criteria for small finance banks (SFBs) to transition into universal banks, including lowering the minimum net worth.

SFBs who wish to transition into universal banks are required to have a minimum net worth of ₹1,000 crore as at the end of the previous quarter (audited).

In the 2016 guidelines, whilst there is no minimum net worth set specifically for SFBs, it indicates that universal banks must have a minimum net worth of ₹5 billion at all times.

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The SFB must also have a satisfactory track record of performance for a minimum period of five years; must have met the prescribed capital to risk-weighted assets ratio (CRAR) for SFBs; and have a GNPA and NNPA of less than or equal to 3% and 1% respectively in the last two financial years.

Shares of the SFB must be listed on a recognised stock exchange, and the SFB is required to have posted a net profit in the last two financial years at the time of application.