Payments banks with 5-year experience can now convert to small finance banks

The Reserve Bank of India (RBI) on Thursday allowed payments banks (PBs), which have been in operation for
at least five years, to convert to small finance banks (SFBs). In guidelines for on-tap licensing of SFBs released today, the central bank raised the net worth requirement for aspiring SFBs to Rs 200 crore from Rs 100 crore.

Further, primary urban cooperative banks (UCBs) who wish to convert to SFBs will be allowed to do so as long as they have a net worth of Rs 100 crore, which will have to be increased to Rs 200 crore within five years from the date of commencement of business. “Incidentally, the net-worth of all SFBs currently in operation is in excess of Rs 200 crore,” the RBI said in the guidelines.