On Friday, the Reserve Bank of India (RBI) proposed a minimum equity capital of Rs 200 crore to set up a Small Finance Bank under the on-tap licensing regime.

The "on-tap" facility allows the RBI to accept applications and grant licenses to payments banks and small finance banks throughout the year to expand financial inclusion in the country through high-technology-low-cost operations. It was proposed in June and the central bank released its draft guidelines for the licensing this week.

The central bank revised the minimum paid-up capital requirement for SFBs to Rs 200 crore from the earlier Rs 100 crore. It also said the promoter should hold a minimum of 40 percent of the paid-up voting equity capital for five years. If the existing promoter shareholding is above 40 percent, it must be brought down to 40 percent within a period of five years, 30 percent within 10 years, and 15 percent in 15 years.

"Whether a promoter ceases to be a promoter or could exit from the bank, after completing the lock-in period of five years, would depend on the RBI's regulatory and supervisory comfort/discomfort and SEBI regulations in this regard," said RBI.

It also maintained its stance on the requirement to have the SFB listed within three years of reaching a networth of Rs 500 crore.

RBI in its draft guidelines said that existing non-banking financial companies (NBFCs), microfinance institutions and local area banks in the private sector, controlled by residents, can be converted into small finance banks.

It also said that proposals for the same licensing from public sector entities and large industrial house/business groups, and autonomous boards/bodies will not be entertained.

Small finance banks provide basic banking activities of accepting deposits and lending to unserved and underserved sections of the society, which include small businesses, small farmers and unorganised sector entities.