Mumbai: The Reserve Bank of India (RBI) on Friday said that small finance banks (SFBs) meeting certain criteria can now seek approval from the regulator to transition into universal banks under the on-tap licesning norms.

To qualify, eligible SFBs must maintain a minimum net worth of Rs 1,000 crore at the end of the preceding quarter and fulfill the stipulated Capital to Risk (Weighted) Assets Ratio (CRAR) requirements designated for SFBs, the central bank said.

As per RBI directives, SFBs aspiring for universal bank status must have scheduled status and demonstrate a satisfactory performance track record spanning a minimum of five years. Additionally, their shares must be publicly traded on a recognized stock exchange.

Moreover, these SFBs must exhibit a net profit over the past two fiscal years and maintain gross non-performing assets (GNPA) and net non-performing assets (NNPA) levels not exceeding three percent and one percent respectively over the same period, according to RBI guidelines.

The RBI clarified that eligible SFBs are not required to have a designated promoter, but if there are existing promoters, they must continue in their roles during the transition to a Universal Bank.

The RBI stated that eligible SFBs undergoing this transition are not allowed to introduce new promoters or alter existing ones.

Furthermore, the RBI stated that there will be no new compulsory lock-in period for the minimum shareholding of existing promoters once the transition to a Universal Bank is completed.

Moreover, any previously approved plans for dilution of promoter shareholding will remain unchanged, according to the central bank. It emphasized a preference for eligible SFBs with diversified loan portfolios.