Skip to main content

Which Small Finance Banks can obtain AD Category-I license?

Small Finance Banks (SFBs) which could act as Authorised Dealer Category-II banks for providing forex related services to their customers, can now apply for license to function as Authorised Dealer Category-I banks.

What are different categories of Authorise Dealers (ADs)?

Authorised Dealer (AD) Category-I – entities which are authorised by Reserve Bank of India (RBI) to carry out all permissible current and capital account transactions.

Authorised Dealer (AD) Category-II – entities which are authorised by RBI to carry out specified non-trade related current account transactions, all the activities permitted to Full Fledged Money Changers (FFMC) and any other activity as decided by RBI, and include (i) Upgraded FFMCs; (ii) Select Regional Rural Banks (RRBs); (iii) Select Urban Cooperative Banks (UCBs); and (iv) Other entities.

Authorised Dealer (AD) Category-III – entities which are authorised by RBI to carry out specific foreign exchange transactions incidental to their business / activities.

Full Fledged Money Changer (FFMC) – a money changer authorised to purchase foreign exchange from non-residents visiting India and residents, and to sell foreign exchange for private and business travel purposes only.

Which small finance banks can apply for Authorised Dealer Category-I license?

Small Finance Banks meeting the following eligibility norms can apply for Authorised Dealer Category-I license –

  1. The bank should have completed at least 2 years of operations as Authorised Dealer Category-II.
  2. The bank should have been included in the Second Schedule to Reserve Bank of India Act, 1934.
  3. It should have a minimum net worth of ₹500 crore.
  4. Its CRAR should not be less than 15%.
  5. The net NPAs of the bank should not exceed 6%, during previous four quarters.
  6. It should have made profit in the preceding 2 years.
  7. It should not have defaulted in maintenance of CRR / SLR during previous 2 years.
  8. It should have sound internal control systems.
  9. It should not have any major regulatory and supervisory concerns.


References

Reserve Bank of India. (2016, January 01). 'Master Direction - Money Changing Activities (Updated as on March 4, 2022)'. Retrieved from https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=11518

Reserve Bank of India. (2022, August 08). 'Authorised Dealer Category-I License eligibility for Small Finance Banks'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12373&Mode=0


Follow at - Telegram   Instagram   LinkedIn   Twitter

Labels:

Comments

Post a Comment

Popular Posts

Reserve Bank of India Act, 1934 – Part-II – Section 17 to 19

The Reserve Bank of India Act, 1934 provides the statutory basis of the functioning of the Reserve Bank of India (RBI). In a series of articles, we will briefly go through the provisions of RBI Act, 1934. This is the second article in the series.  Section 17 – Business which the Bank may transact RBI shall be authorized to carry on and transact the several kinds of business hereinafter specified, namely – 17(1) – Accept deposit without interest from the Central / State Government, local authorities, banks and any other persons. 17(1A) – Accept deposit, repayable with interest, from banks or any other person under the Standing Deposit Facility Scheme, as approved by the Central Board, for the purposes of liquidity management.   Bills of Exchange (B/E) & Promissory Note (PN) Bearing 2 or more good signatures, one of which shall be of B/E & PN arising out of Maturing within 17(2)(a) Purchase, sale and rediscou...
Post a Comment
Read more

Reserve Bank of India Act, 1934 – Part-I – Preamble and Section 1 to 13

The Reserve Bank of India Act, 1934 provides the statutory basis of the functioning of the Reserve Bank of India (RBI). In a series of articles, we will briefly go through the provisions of RBI Act, 1934. This is the first article in the series. Preamble of the Act RBI to – Regulate the issue of bank notes. Keep reserves for monetary stability in India. Operate currency and credit system of the country to its advantage. The primary objective of the monetary policy is to maintain price stability while keeping in mind the objective of growth. Chapter I – Preliminary Section 1 – Short title, extent and commencement 1(1) – This Act may be called the Reserve Bank of India Act, 1934. 1(2) – The Act extends to whole of India. Chapter II - Incorporation, Capital, Management and Business Section 3 – Establishment and incorporation of Reserve Bank 3(1) – RBI to take over management of the currency from the Central Government. 3(2) – RBI to have perpetual succession, common seal, and shall by...
Post a Comment
Read more

Reserve Bank of India Act, 1934 – Part-III – Section 20 to 40

The Reserve Bank of India Act, 1934 provides the statutory basis of the functioning of the Reserve Bank of India (RBI). In a series of articles, we will briefly go through the provisions of RBI Act, 1934. This is the third article in the series.  Chapter III - Central Banking Functions Section 20 – Obligation of the Bank to transact Government business RBI shall undertake – To accept monies for account of the Central Government and to make payments up to the amount standing to the credit of its account, and to carry out its exchange, remittance and other banking operations. Management of the public debt of the Union. Section 21 – Bank to have the right to transact Government business in India The Central Government shall entrust RBI with – All its money, remittance, exchange and banking transactions in India, and shall deposit free of interest all its cash balances with RBI. The Central Government may carry on money transactions at places where RBI has no branches or agencies and m...
Post a Comment
Read more

Reserve Bank of India Act, 1934 – Part-IV – Section 42 to 45

The Reserve Bank of India Act, 1934 provides the statutory basis of the functioning of the Reserve Bank of India (RBI). In a series of articles, we will briefly go through the provisions of RBI Act, 1934. This is the fourth article in the series.  Section 42 – Cash reserves of scheduled banks to be kept with the Bank 42(1) – Every bank included in the Second Schedule shall maintain with RBI an average daily balance at a percent (notified by RBI) of its total demand and time liabilities in India. 42(1A) – RBI may direct every scheduled bank to maintain with RBI, in addition to the balance prescribed under Section 42(1), an additional average daily balance at a rate (specified by RBI). 42(1C) – RBI may specify any transaction or class of transactions to be regarded as liability in India of a scheduled bank. If any question arises as to whether any transaction or class of transactions shall be regarded as liability in India of a schedule bank, the decision of RBI thereon shall be fina...
Post a Comment
Read more

Reserve Bank of India Act, 1934 – Part-V – Section 45B to 45JA

The Reserve Bank of India Act, 1934 provides the statutory basis of the functioning of the Reserve Bank of India (RBI). In a series of articles, we will briefly go through the provisions of RBI Act, 1934. This is the fifth article in the series.  Chapter IIIA - Collection and Furnishing of Credit Information Section 45B – Power of Bank to collect credit information RBI may collect credit information from banking companies and furnish it to any banking company in accordance with section 45D. Section 45C – Power to call for returns containing credit information RBI may direct any banking company to submit statements relating to credit information. Section 45D – Procedure for furnishing credit information to banking companies A banking company may apply to RBI to provide credit information. RBI shall furnish the requested credit information without disclosing the names of the banking companies which have submitted the information. RBI may levy fees of up to Rs.25 for furnishing credit...
Post a Comment
Read more