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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


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