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Small Finance Banks line up for IPO’s

The coming Small Finance Bank IPOs hint at a banking system that’s maturing well and this should be good news for the Indian banking sector.

What’s the news?

Utkarsh Small Finance Bank Ltd has filed its papers with the regulator to raise an aggregate of Rs. 1,350 Cr via Initial Public Offering

What is a Small Finance Bank?

Small Finance Banks (SFBs) are financial institutions that address the financial needs of the underprivileged sections through basic banking activities of lending and acceptance of deposits. These banks can do almost everything that a normal commercial bank can do but on a much smaller scale. A Small Finance Bank aims to offer its services to underserved sections of customers, including small business units, small and marginal farmers, micro and small industries, and even entities in the unorganized sector.

History of SFBs

 The proposal for establishing SFBs was made by Late Mr Arun Jaitley in his budget speech in 2014. Following that announcement, the RBI came out with the guidelines for Small Finance Banks in November 2014. There were 73 applicants for the SFB license and in 2015 RBI approved the license for 10 entities. Post the approvals, India saw the emergence of Small finance banks in 2016. 

The Reserve Bank of India guidelines requires small finance banks to list within three years of their net worth reaching Rs 500 crore. Among the 10 entities that had started SFB operations, only three, including AU Small Finance Bank, Ujjivan and Equitas Small Finance Bank, have been listed so far. 

Utkarsh Small Finance Bank Ltd has filed its papers with the regulator to raise an aggregate of Rs. 1,350 Cr via Initial Public Offering. Others like Suryoday SFB, Jana SFB and ESAF SFB are working on their IPO plans. Suryoday SFB recently received SEBI approval to float an IPO

The upcoming IPOs are a sign of the banking system reaching desired levels of maturity and such institutions will play a pivotal role in nation-building. 

 

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