According to the Reserve Bank of India, what is one of the eligibility criteria for a Small Finance Bank (SFB) to transition into a Universal Bank ?
Minimum net worth of ₹ 1,000 crore
A small finance bank must have a minimum net worth of ₹ 1,000 crore to apply for a universal banking licence — option 4.
The guidelines. In April 2024 the Reserve Bank issued a circular setting out how an existing small finance bank may convert into a universal bank. The main conditions were :
| Condition | Requirement |
|---|---|
| Net worth | At least ₹ 1,000 crore at the end of the previous quarter |
| Listing | Shares must be listed on a recognised stock exchange |
| Track record | Satisfactory performance for at least five years of operation |
| Profitability | Net profit in each of the last two financial years |
| Asset quality | Gross NPA of 3 per cent or less and net NPA of 1 per cent or less in each of the last two years |
| Priority sector | Compliance with the prescribed priority-sector lending targets |
What the two kinds of bank are. Small finance banks were created on the recommendation of the Nachiket Mor Committee and licensed from 2015 to serve small businesses, marginal farmers and the unorganised sector. They must lend 75 per cent of adjusted net bank credit to priority sectors, and at least half their loan book must consist of loans of up to ₹ 25 lakh. A universal bank carries no such restriction on the size or type of its lending and can offer the full range of banking business, so conversion is a substantial widening of scope.
Why the conditions are strict. A universal bank takes public deposits without the guard-rails placed on a small finance bank, so the regulator requires demonstrated capital strength, clean books, a listing that brings market discipline, and a record long enough to judge. AU Small Finance Bank was the first to apply under the new route.
Hence, the answer is a minimum net worth of ₹ 1,000 crore.
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