Payments banks that intend to convert into can do so with three years’ experience rather than five, according to the recommendations of a working group of the (RBI).


This relaxation, if accepted, may open the door for payments banks that wish to convert. Paytm, IndiaPost, and Fino Payments may benefit from this relaxation.

The RBI has granted licences to seven payments banks to date. But one surrendered its licence this year.

Meanwhile, the working group has recommended an increase in the initial paid-up voting equity share capital/net worth required to set up a small finance bank to Rs 300 crore. Currently, it is Rs 200 crore. Initially when licensing guidelines for were issued, it was prescribed that the minimum paid-up equity capital requirement for setting up an SFB would be Rs 100 crore. And for a non-banking financial company converting into a small finance bank, the minimum net worth would be Rs 100 crore.

The working group observed that since of the 10 SFBs that commenced operations, seven started with a net worth of more than Rs 300 crore and the net worth of the remaining three crossed Rs 300 crore in one to three years of the commencement of their business. Hence raising the initial capital requirement to Rs 300 crore would be more realistic.

Recommendations of the working group

  • The initial paid-up voting equity share capital required to set up an SFB should be increased to Rs 300 crore

  • UCBs who want to transit to SFBs need initial capital requirement of Rs 150 crore

  • It has to be increased to Rs 300 crore in five years

  • New SFBs can take 6 years to list with outer limit of 10 years

  • Relaxation on payments banks to benefit Paytm, IndiaPost, and Fino Payments

As for urban-cooperative banks that want to convert into SFBs, the initial capital requirement should be Rs 150 crore and that has to be increased to Rs 300 crore in five years.

The working group has suggested that SFBs to be set up should be listed within six years of reaching a net worth equivalent to the prevalent entry capital requirement for universal banks, or 10 years of the date of starting operations, whichever is earlier.

Currently, have to list within three years of achieving a net worth of Rs 500 crore or six years of the date of commencing operations, whichever is later.

The group suggested small finance banks and payments banks be listed within six years of the date of reaching a net worth of Rs 500 crore or 10 years of commencing operations, whichever is earlier.

“The experts generally agreed that rushing the listing timelines will result in the management of the new banks having to devote disproportionate attention to listing requirements during the initial years of operations rather than the operations of the bank itself,” the working group noted.

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