Why in News?
Recently, RBI set up a five-member Standing External Advisory Committee (SEAC), to evaluate applications for universal banks and Small Finance Banks.
- SFBs provide financial services to the unserved and unbanked region of the country.
- These are registered as a public limited company under the “Companies Act, 2013”.
Nature and Scope of Activities undertaken by SFBs:
- Acceptance of deposits
- Lending to small business units, small and marginal farmers, micro and small industries, and unorganised sector entities.
- Other simple financial services, if it does not require any commitment of own funds, like the distribution of mutual fund units, insurance products, pension products, etc.
- SFBs can also become an Authorised Dealer in foreign exchange business as per client’s requirements after authorisation by RBI.
NOTE: There is no restriction in the area and field of operations of SFBs; however, while granting license preference is given to those applicants who, in the initial phase, sets up banks in under-banked States/districts, such as in the North-East, East and Central regions of the country.
Related Information: Universal Banks
- Universal Banks undertake multiple financial activities under one roof, thereby creating a financial supermarket.
- They can be commercial banks, Financial Institutions, Non-Banking Financial Companies (NBFCs) etc.
- Such entities focus on using their large branch networkto offer a wide and varied range of services under a single brand name.
- According to RBI guidelines, resident individuals and professionals who have10 years of experience in banking and finance at senior level are eligible to promote universal banks.
- However, large industrial houses are excluded to be eligible entities for purpose of Universal Banks, but they are permitted to invest in the banks up to 10%.