All scheduled small finance banks (SFBs), after they complete at least years of operations as Authorised Dealer Category-II, will become eligible to for Authorised Dealer Category-I license. These lenders will be able to provide their customers with more forex products.
The Reserve Bank of India announced the move so as to give more flexibility to small finance banks. “With the objective of giving more flexibility to SFBs to meet their customers’ foreign exchange business requirement, it has been decided that all the scheduled SFBs, after completion of at least two years of operations as Authorised Dealer Category-II, will be eligible for Authorised Dealer Category-I license, subject to compliance with prescribed eligibility norms” the central bank said in a notification.
As a Category-I authorised dealer, the SFBs will have the permission to deal in all other transactions in foreign exchange including bill of exchange, cheques, letters of credit, deposits, etc. On the other hand, as a Category-II Authorised dealer, the bank will be allowed to offer only money-changing facilities.
Eligibility criteria
The eligibility criteria for the same is that the small finance bank should have a minimum net worth of Rs 500 crore. Moreover, the capital adequacy ratio, also known as capital-to-risk weighted assets ratio (CRAR) should not be less than 15 per cent.
Further, the small finance lender must not have net non-performing assets beyond 6 per cent during the previous four quarters. It should not have defaulted in maintenance of CRR/ SLR during previous two years.
Other things include that the SFB should not have any major regulatory and supervisory concerns and it should have reported profit in the preceding two years. Additionally, the lender should also have completed at least two years of operations as Authorised Dealer Category-II.
