Most SFBs would not clamour to become universal banks if RBI eases some curbs, says ex-Secy

Former Financial Services Secretary D K Mittal emphasized the vital role of small finance banks (SFBs) in promoting financial inclusion. He suggested that easing certain restrictions by the Reserve Bank of India (RBI) could discourage most SFBs from aspiring to become universal banks. \r

Mittal proposed lifting limitations on SFBs, such as allowing co-lending, pass-through certificates (PTC), and subsidiaries. He recommended aligning SFBs with commercial banks while maintaining specific criteria like priority sector lending and capital requirements. By doing so, SFBs could effectively serve as universal banks with a focus on financial inclusion, thus reducing the urgency for them to transition. \r

The RBI's April guidelines outline conditions for SFBs aspiring to become universal banks, including net worth, profitability, and asset quality criteria.