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

Regulatory Measures for the Foreign Exchange Market

Reserve Bank of India (RBI) has announced regulatory measures for the foreign exchange market. Cancellation and rebooking / rollovers of foreign exchange derivative contracts An Authorised Dealer shall not permit users to rebook any foreign exchange derivative contract involving the INR, whether deliverable or non-deliverable, which has been cancelled with any of the Authorised Dealers. An Authorised Dealer may, however, continue to permit users to rollover foreign exchange derivative contracts on maturity, subject to compliance with the extant directions. Threshold limit for taking positions without requirement to establish the existence of underlying Authorised Dealers were permitted to allow users to take positions upto USD 100 million equivalent of notional value (outstanding at any point of time), across all Authorised Dealers, for hedging contracted exposure without the requirement to establish the existence of underlying exposure.  Further, a user was allowed to take positio...
Post a Comment
Read more

Reserve Bank of India Act, 1934 – Part-VII – Section 45S to 45Y

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 seventh article in the series.  Chapter IIIC – Prohibition of Acceptance of Deposits by Unincorporated Bodies Section 45S – Interpretation An individual / firm / unincorporated association of individuals shall not accept any deposits if – his / its business wholly or partly includes the activities specified in Section 45-I. his / its principal business is that of receiving deposits, or lending in any manner. Section 45T – Power to issue search warrants On an application by RBI / State Government, the Court to issue search warrant for the documents relating to acceptance of deposits in contravention of the provisions of Section 45S. Chapter IIID – Regulation of Transactions in Derivatives, Money Market Instruments, Securities, etc. Section 45V – Transactions in derivati...
Post a Comment
Read more

Reserve Bank of India Act, 1934 – Part-IV – Section 42 to 45 (updated as on April 15, 2025)

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 (updated as on April 15, 2025) 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. For the purpose, fortnight means the period from the first day to the 15th day of each calendar month or 16th to the last day of each calendar month, both days inclusive. 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...
Post a Comment
Read more

Credit Facilities to Scheduled Castes (SCs) & Scheduled Tribes (STs)

Reserve Bank of India (RBI) has issued guidelines on credit facilities to Scheduled Castes (SCs) & Scheduled Tribes (STs). What are the guidelines on credit facilities to SCs & STs? District Level Consultative Committees formed under the Lead Bank Scheme should continue to be the principal mechanism of co-ordination between banks and development agencies.  National Scheduled Tribes Finance & Development Corporation and National Scheduled Castes Finance & Development Corporation have been set up under the administrative control of Ministry of Tribal Affairs and Ministry of Social Justice & Empowerment, respectively. Banks should advise their branches / controlling offices to render all the necessary institutional support to enable these institutions to achieve the desired objectives. Loans sanctioned to State Sponsored Organisations for Scheduled Castes / Scheduled Tribes for the specific purpose of purchase and supply of inputs and / or the marketing of the out...
Post a Comment
Read more

Reserve Bank of India Act, 1934 – Part-VIII – Section 45Z to 45ZO

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 eighth article in the series.  Chapter IIIF – Monetary Policy Section 45Z – Provisions of this Chapter to override other provisions of Act The provisions of Chapter IIIF to override any other provisions of this Act. Section 45ZA – Inflation target In consultation with RBI, the Central Government shall determine the inflation target in terms of the Consumer Price Index, once in every 5 years. Section 45ZB – Constitution of Monetary Policy Committee The Central Government may constitute a committee to be called the Monetary Policy Committee (MPC) of RBI.  MPC shall consist of the following –  Governor of RBI (chairperson) Deputy Governor of RBI, in-charge of monetary policy (member) One officer of RBI nominated by the Central Board (member) Three persons appoin...
Post a Comment
Read more