First Small Finance Bank

First Small Finance Bank Starts Operations 


Capital Local Area Bank launched the country's first small finance bank on Sunday, seven months after the Reserve Bank of India gave its in-principle approval for this new type of banks. While inaugurating the bank, 
Nirmal Chand, regional director of RBI, Chandigarh, said it was a historic day for the banking sector in India as it would be reckoned as a day when small finance banks were introduced into the banking system. We have regional rural banks, cooperative banks and other small entities, besides a giant network of public and private sector banks. But, there is a huge void in the banking sector. Chand noted that India has 7 branches per 100,000 population compared with 40 branches per 100,000 population in developed countries this gap can be bridged by small finance banks.

Capital Small Finance Bank Ltd Jalandhar-headquartered bank(http://capitalbank.co.in/corporate-videocommenced operations with 10 branches. "We have approval for 27 branches for this year.?The bank will focus on neighbouring states for branch expansion in the initial years." Capital Local Area Bank is one of the 10 companies that received the in-principle licences to set up small finance banks, which are allowed to provide basic banking services. They have 18 months to comply with the rules and start operations. 

Sarvjit Singh Samra, managing director of Capital Small Finance Bank, said the new small finance bank will operate seven days a week, a practice that Capital Local Area Bank has been following for 16 years."When the bank (Capital Local) commenced operations, at that point of time the country's rural population was deprived of modern banking facilities and the banking hours for rural branches were only 18 hours a week," Samra said. His organisation, from day one, introduced seven-day banking, with 43 banking hours a week. The bank's transition from a local area bank into a small finance bank has removed the geographical barrier of expansion. The bank's business is projected to increase four-fold from Rs 3,000 crore as on March 31, 2016 to Rs 12,000 crore and branch network to 216 by March 2021.

Samra said that under RBI's statutory guidelines, small finance banks should lend at least 50 per cent of their loans to an average ticket size of below Rs 25 lakh. For Capital Small Finance Bank, exposure to small ticket borrowers is 60 per cent. The bank's priority-sector lending, too, is higher at 79 per cent of total advances against the RBI norm of 75 per cent.

 
                                   

Summary

Financial literacy means one bank account per adult. Small banks can tap this population. Independent studies have revealed that around 90 per cent of the micro and small businesses have no access to the formal mainstream financial institutions. Since their ticket size is small, these banks can bring micro and small entrepreneurs into their fold.
The central bank granted 10 entities in-principle licenses to open small banks towards expanding access to financial services in rural and semi-urban areas.
?         Au Financiers India, Jaipur
?         Capital Local Area Bank, Jalandhar
?         Disha Microfin, Ahmedabad
?         Equitas Holdings, Chennai
?         RGVN (North East) Microfinance, Guwahati
?         Suryoday Micro Finance, Navi Mumbai
?         ESAF Microfinance, Chennai
?         Utkarsh Micro Finance, Varanasi
?         Ujjivan Financial Services, Bengaluru
?         Janalakshmi Financial Services, Bengaluru

Fast Facts about the Bank
  • Capital Local Area Bank has been in operation since January 2000
  • It had been operating with 47 branches in five districts of Punjab- Jalandhar, Hoshiarpur, Kapurthala, Amritsar and Ludhiana.
  • It is among the 10 entities that were given the in-principle approval by RBI to set up small finance banks.
  • In the current financial year, the bank would consolidate its business in Punjab by adding 29 branches. Out of this 10 were opened
  • The only bank with seven-day operations in rural areas. (43 banking hrs.)
Discussions
Interest on Savings Bank Accounts

Nature
Type
Rate of Interest
Normal
Rate of Interest
Senior Citizen
Minimum Balance
Rural

Minimum Balance
Semi Urban
Minimum Balance
Urban

Domestic
Savings Bank Account without Cheque Book Facility

4%

4%

100/-

300/-

300/-

Savings Bank Account with Cheque Book Facility

4%

4%

300/-

500/-

500/-

Basic Savings Bank Account (Suvidha Bachat)

4%

4%

Zero

Zero

Zero
Non Resident

NRO

4%
-
-
-
-


NRE

4%
-
-
-
-

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