The Reserve Bank of India (RBI) has announced the formation of a new Standing External Advisory Committee (SEAC) to assess applications for licenses for Universal Banks and Small Finance Banks (SFBs). The committee, which comprises five distinguished members from the banking and financial sectors, is chaired by M.K. Jain, the former deputy governor of the RBI.

Key Members of the Advisory Committee

The newly formed committee includes:

• M.K. Jain: Chairperson and former Deputy Governor, RBI.
• Revathy Iyer: Director, Central Board, RBI.
• Parvathy V. Sundaram: Former Executive Director, RBI.
• Hemant G Contractor: Former Managing Director, State Bank of India, and former Chairman, Pension Fund Regulatory and Development Authority.
• N.S. Kannan: Former Managing Director and CEO, ICICI Prudential Life Insurance.

The committee is set to function for a tenure of three years, during which it will evaluate the eligibility of applicants for bank licenses.

Committee’s Role and Responsibilities

As per the RBI’s licensing guidelines, the applications for Universal Banks and Small Finance Banks will first undergo initial screening by the Reserve Bank to ensure that they meet the basic eligibility criteria. Post this preliminary check, the committee will conduct a detailed evaluation of the applications.

The committee is designed to leverage the expertise of its members, who have extensive experience in banking, financial services, and regulatory frameworks. This ensures a robust and transparent evaluation process.

Support from RBI

The RBI stated that the Department of Regulation will provide secretarial assistance to the committee, ensuring smooth operations.

Historical Context

This is not the first time the RBI has established such a committee. The earlier SEAC, formed in March 2021, was chaired by Shyamala Gopinath, another former Deputy Governor of the RBI. That committee also served a three-year term and was instrumental in shaping the regulatory landscape for Universal Banks and Small Finance Banks.

Exemptions for SFBs

It is important to note that the new committee will not review applications from Small Finance Banks transitioning to Universal Bank licenses. Their “fit and proper” credentials were already assessed during the initial licensing phase.

Pending Applications

Currently, several applications are under review by the RBI. Notable among these are:

• Annapurna Finance and AU Small Finance Bank (AU SFB): Applications for Universal Bank licenses.
• Fino Payments Bank and VFS Capital: Applications for Small Finance Bank licenses.

General Overview: Universal Banks and SFBs

Universal Banks offer a comprehensive range of financial services, including deposits, lending, investments, and more. On the other hand, Small Finance Banks (SFBs) are specialized institutions aimed at promoting financial inclusion by providing banking services to underserved sections of society, including small businesses, farmers, and micro-entrepreneurs.

The establishment of this committee underscores the RBI’s commitment to strengthening India’s banking ecosystem and ensuring a fair, transparent, and efficient licensing process.

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Source

Information is based on recent announcements by the Reserve Bank of India (RBI).