RBI turns down two small finance banks' licences after finding them not suitable 

The Reserve Bank of India (RBI) on April 12 said it has rejected two small finance banks licences filed by Dvara Kshetriya Gramin Financial Services Pvt Ltd and Tally Solutions Pvt Ltd as they were found to be not suitable.

Dvara KGFS (Kshetriya Gramin Financial Services), backed by impact investor Leapfrog and Stakeboard Capital, is Non-Banking Financial Company. The central bank said it had received about a dozen applications to set up banks under the guidelines for 'on tap' Licensing of Universal Banks and Small Finance Banks (SFBs).

Tally Solutions Pvt Ltd is a business management software company. It provides Financial Information Users (FIUs) and Financial Information Providers (FIPs) software to create easy access to the lending ecosystem and other financial services.

Earlier on July 4, 2023, the central bank rejected three applications viz., Shri Akhil Kumar Gupta, Cosmea Financial Holdings Pvt Ltd, and West End Housing Finance Ltd.

The guidelines for 'on tap' licensing of Universal Banks and SFBs in the private sector were issued on August 1, 2016, and December 5, 2019, respectively.

In a statement on Friday, the RBI said the examination of two more applications for setting up a small finance bank has been completed as per the procedure laid down under extant guidelines.

Based on the assessment of the applications, the central bank said it did not find applicants -- Dvara Kshetriya Gramin Financial Services Private Limited and Tally Solutions Private Limited -- suitable for granting of in-principle approval to set up a small finance bank.

However, two remaining applications are still "under examination".

In May 2022, it announced the decisions on six applications.

In July last year, the RBI had rejected applications of Akhil Kumar Gupta, Cosmea Financial Holdings Pvt Ltd and West End Housing Finance Ltd.

As per the guidelines, the initial minimum paid-up voting equity capital for a universal bank should be Rs 500 crore. Thereafter, the bank should have a minimum net worth of Rs 500 crore at all times.

The minimum paid-up voting capital/net worth for SFBs should be Rs 200 crore.

In case of urban co-operative banks desirous of voluntarily transiting into SFBs, the initial requirement of net worth is Rs 100 crore, which will have to be increased to Rs 200 crore within five years.

(With PTI inputs)