MUMBAI:  The Reserve Bank of India (RBI) on Wednesday decided to grant “in-principle” approval to 10 applicants to set up small finance banks under the “Guidelines for Licensing of Small Finance Banks in the private sector” (Guidelines) to promote financial inclusion.

The minimum paid-up equity capital for small finance banks shall be `100 crore. The promoter’s minimum initial contribution to the paid-up equity capital shall at least be 40 per cent and gradually brought down to 26 per cent within 12 years from the date of commencement of business of the bank.

The “in-principle” approval granted will be valid for 18 months to enable the applicants to comply with the requirements under the Guidelines and fulfil other conditions as may be stipulated by the RBI to 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, applicants cannot undertake any banking business.

Going forward, the Reserve Bank will use the learning from this round to appropriately revise the guidelines and move to giving licences more regularly, that is, virtually “on tap”.

The apex bank had received 72 applications for small finance banks. Subsequently, Microsec Resources Private Limited, Kolkata withdrew its application. In respect of another application made by Shri Ajay Singh Bimbhet and others, two of the co-promoters withdrew their candidature and thereby the application was deemed to have been withdrawn.

As per RBI’s prudential norms, the small finance banks should extend 75 per cent of its Adjusted Net Bank Credit (ANBC) to the sectors eligible for classification as priority sector lending (PSL). Also, at least 50 per cent of its loan portfolio should constitute loans and advances of upto ` 25 lakh.