 "Small ones seek big splash")
The central bank on Wednesday granted 10 entities in-principle licences to open small finance banks - another move towards expanding access to financial services in rural and semi-urban areas. Business Standard lists these out, and looks at their plans:
1. Au Financiers India, Jaipur
Au Financiers India, a non-banking finance corporation (NBFC) incorporated in 1996, was founded by a chartered accountant, Sanjay Agarwal, a first-generation entrepreneur. It is registered as a non-deposit accepting NBFC with the Reserve Bank of India (RBI). The company is backed by investors such as Motilal Oswal Private Equity Advisors, International Finance Corporation, Warburg Pincus, ChrysCapital and Kedaara Capital. It gives loans primarily to semi-urban and rural areas, including car loans, loans against property as well as loans for small and medium enterprises.
2. Capital Local Area Bank, Jalandhar
3. Disha Microfin, Ahmedabad
Disha Microfin offers affordable financial services in rural and semi-urban households in Gujarat, Rajasthan, Madhya Pradesh and Karnataka. It offers microfinance loans, credit-linked insurance and retirement solutions. Started in 2009, Disha crossed Rs 200 crore in assets under management (AUM) in August 2014. Sameer Nanavati is the CEO of the company, backed by equity investors such as India Value Fund.
4. Equitas Holdings, Chennai
Equitas, founded in 2007 as a microfinance institution (MFI), diversified into financing purchase of used-commercial vehicles and giving housing loans for the self-employed, among others, through wholly owned subsidiaries. It was founded by Vasudevan P N, who is the managing director. For FY15, it booked a profit of Rs 106.6 crore
5. RGVN (North East) Microfinance, Guwahati
RGVN (North East) Microfinance, has its roots in Rashtriya Gramin Vikas Nidhi, a society promoted by S M Palia, former executive director of IDBI. The company started its journey as a society in 1990 and applied for an NBFC-MFI licence in 2008. In 2010, the company converted into an NBFC-MFI. Shareholders are SIDBI, North Eastern Development Finance Corporation, Brahmaputra Community Development Trust, Mutual Benefit Trust, Dia Vikas Capital, Norwegian Microfinance Initiative and OIKO Credit International.
6. Suryoday Micro Finance, Navi Mumbai
Suryoday was incorporated in November 2008. In 2009, it received a licence for NBFC operations. It was promoted by R Baskar Babu, who is the chief executive. Investors are Developing World Markets, Aavishkaar Goodwell, IFC, Lok Capital, HDFC Life.
7. ESAF Microfinance, Chennai
ESAF Microfinance is headed by K Paul Thomas, who is the chairman and managing director. ESAF Society, a non-government organisation, was launched in 1992 to deal with unemployment and poverty. In 1995, the micro-enterprise development initiative of ESAF was launched, which resulted in the formation of the NBFC, ESAF Microfinance and Investments, in 2008.
It now covers Kerala, Tamil Nadu, Maharashtra, Madhya Pradesh, Chhattisgarh and Jharkhand and offers micro-credit services, social security services including insurance and pension, and money transfer. It had a net profit of Rs 22.5 crore in FY15.
8. Utkarsh Micro Finance, Varanasi
The company started operations in August 2009. Govind Singh is the founder and managing director.
Utkarsh extends services in the northern and central belts. Investors are Aavishkaar Goodwell, Commonwealth Development Corporation, International Finance Corporation, Lok Capital and Norwegian Microfinance Initiative.
9. Ujjivan Financial Services, Bengaluru
Founded in October 2005, Ujjivan Financial Services was started to provide financial services to the urban poor. Samit Ghosh, founder, is the chief executive and managing director. Investors are Elevar Equity, Women's World Banking Capital Partners, Lok Capital, International Finance Corporation (IFC), CX Partners Fund 1, NewQuest Asia Investments II, CDC Group, FMO, WCP Holdings, India Financial Inclusion Fund, Sequoia Capital, Bajaj Holdings & Investment.
10. Janalakshmi Financial Services, Bengaluru
Founded and promoted by Ramesh Ramanathan, Janalakshmi Financial Services started microfinance operations in July 2006 by absorbing the Sanghamithra Urban Programme.
Ramanathan is the chairman and R Srinivasan the managing director and chief executive. Investors are Michael and Susan Dell Foundation, Lok Capital and Bellwether Microfinance Fund.
A LOOK AT SMALL WONDERS
What are small finance banks?
What are small finance banks? Small finance banks will be similar to commercial lenders and will undertake basic banking activities of accepting deposits and lending to unserved and under-served sections.
What can these banks do?
The maximum loan size and investment limit exposure to single and group obligators cannot be more than 10 per cent and 15 per cent of the capital funds, respectively. Apart from this, at least 50 per cent of its loan portfolio has to include loans and advances of up to Rs 25 lakh.
Will these be subject to the same regulatory norms as universal banks?
Yes, small finance bank will be subject to all prudential norms and regulations as applicable to commercial banks, including the requirement of maintaining cash reserve ratio and statutory liquidity ratio.
What is the minimum capital requirement?
The minimum paid-up equity capital for small finance banks should be Rs 100 crore
Can these lenders convert into a universal bank?
Yes, subject to Reserve Bank approval. It will depend on minimum paid-up capital and net worth requirement, as applicable to universal banks, and the track record.
1. Au Financiers India, Jaipur
Au Financiers India, a non-banking finance corporation (NBFC) incorporated in 1996, was founded by a chartered accountant, Sanjay Agarwal, a first-generation entrepreneur. It is registered as a non-deposit accepting NBFC with the Reserve Bank of India (RBI). The company is backed by investors such as Motilal Oswal Private Equity Advisors, International Finance Corporation, Warburg Pincus, ChrysCapital and Kedaara Capital. It gives loans primarily to semi-urban and rural areas, including car loans, loans against property as well as loans for small and medium enterprises.
2. Capital Local Area Bank, Jalandhar
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Capital Local Area Bank is the largest local area bank based in Jalandhar. S S Samra is its managing director. Capital, which has completed 15 years of operation, has business of more than Rs 2,600 crore, 39 branches and 330,000 accounts. In the current financial year, 10 more branches would become operational. More than 80 per cent of its business is in rural and semi-urban areas. It also offers internet and mobile banking and posted Rs 14.2-crore profit in FY15.
3. Disha Microfin, Ahmedabad
Disha Microfin offers affordable financial services in rural and semi-urban households in Gujarat, Rajasthan, Madhya Pradesh and Karnataka. It offers microfinance loans, credit-linked insurance and retirement solutions. Started in 2009, Disha crossed Rs 200 crore in assets under management (AUM) in August 2014. Sameer Nanavati is the CEO of the company, backed by equity investors such as India Value Fund.
4. Equitas Holdings, Chennai
Equitas, founded in 2007 as a microfinance institution (MFI), diversified into financing purchase of used-commercial vehicles and giving housing loans for the self-employed, among others, through wholly owned subsidiaries. It was founded by Vasudevan P N, who is the managing director. For FY15, it booked a profit of Rs 106.6 crore
5. RGVN (North East) Microfinance, Guwahati
RGVN (North East) Microfinance, has its roots in Rashtriya Gramin Vikas Nidhi, a society promoted by S M Palia, former executive director of IDBI. The company started its journey as a society in 1990 and applied for an NBFC-MFI licence in 2008. In 2010, the company converted into an NBFC-MFI. Shareholders are SIDBI, North Eastern Development Finance Corporation, Brahmaputra Community Development Trust, Mutual Benefit Trust, Dia Vikas Capital, Norwegian Microfinance Initiative and OIKO Credit International.
6. Suryoday Micro Finance, Navi Mumbai
Suryoday was incorporated in November 2008. In 2009, it received a licence for NBFC operations. It was promoted by R Baskar Babu, who is the chief executive. Investors are Developing World Markets, Aavishkaar Goodwell, IFC, Lok Capital, HDFC Life.
7. ESAF Microfinance, Chennai
ESAF Microfinance is headed by K Paul Thomas, who is the chairman and managing director. ESAF Society, a non-government organisation, was launched in 1992 to deal with unemployment and poverty. In 1995, the micro-enterprise development initiative of ESAF was launched, which resulted in the formation of the NBFC, ESAF Microfinance and Investments, in 2008.
It now covers Kerala, Tamil Nadu, Maharashtra, Madhya Pradesh, Chhattisgarh and Jharkhand and offers micro-credit services, social security services including insurance and pension, and money transfer. It had a net profit of Rs 22.5 crore in FY15.
8. Utkarsh Micro Finance, Varanasi
The company started operations in August 2009. Govind Singh is the founder and managing director.
Utkarsh extends services in the northern and central belts. Investors are Aavishkaar Goodwell, Commonwealth Development Corporation, International Finance Corporation, Lok Capital and Norwegian Microfinance Initiative.
9. Ujjivan Financial Services, Bengaluru
Founded in October 2005, Ujjivan Financial Services was started to provide financial services to the urban poor. Samit Ghosh, founder, is the chief executive and managing director. Investors are Elevar Equity, Women's World Banking Capital Partners, Lok Capital, International Finance Corporation (IFC), CX Partners Fund 1, NewQuest Asia Investments II, CDC Group, FMO, WCP Holdings, India Financial Inclusion Fund, Sequoia Capital, Bajaj Holdings & Investment.
10. Janalakshmi Financial Services, Bengaluru
Founded and promoted by Ramesh Ramanathan, Janalakshmi Financial Services started microfinance operations in July 2006 by absorbing the Sanghamithra Urban Programme.
Ramanathan is the chairman and R Srinivasan the managing director and chief executive. Investors are Michael and Susan Dell Foundation, Lok Capital and Bellwether Microfinance Fund.
A LOOK AT SMALL WONDERS
What are small finance banks?
What are small finance banks? Small finance banks will be similar to commercial lenders and will undertake basic banking activities of accepting deposits and lending to unserved and under-served sections.
What can these banks do?
The maximum loan size and investment limit exposure to single and group obligators cannot be more than 10 per cent and 15 per cent of the capital funds, respectively. Apart from this, at least 50 per cent of its loan portfolio has to include loans and advances of up to Rs 25 lakh.
Will these be subject to the same regulatory norms as universal banks?
Yes, small finance bank will be subject to all prudential norms and regulations as applicable to commercial banks, including the requirement of maintaining cash reserve ratio and statutory liquidity ratio.
What is the minimum capital requirement?
The minimum paid-up equity capital for small finance banks should be Rs 100 crore
Can these lenders convert into a universal bank?
Yes, subject to Reserve Bank approval. It will depend on minimum paid-up capital and net worth requirement, as applicable to universal banks, and the track record.