RBI released eligibility requirements for small finance banks to became authorised dealer category-I licence

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 Eligibility norms for Small Finance Banks for Authorised Dealer Category-I

  1. The bank should have completed at least two years of operations as Authorised Dealer Category-II.

  2. The bank should have been included in the Second Schedule to RBI 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 two years.

  7. It should not have defaulted in maintenance of CRR/ SLR during previous two years.

  8. It should have sound internal control systems.

  9. It should not have any major regulatory and supervisory concerns.




Licensing as Authorised Dealer- Category II

  1. NBFCs offering such services shall have a ‘minimum investment grade rating’.

  2. NBFCs offering such services shall put in place a board approved policy on (a) managing the risks, including currency risk, if any, and (b) handling customer grievances arising out of such activities. A monitoring mechanism, at least at monthly intervals, shall be put in place for such services.



On a review, it has been decided that the minimum investment grade credit rating for deposits of NBFCs shall be ‘BBB–’ from any of the SEBI-registered Credit Rating Agencies.


Meaning of BBB Rating ( Moderate Safety):
Instruments with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligations. Such instruments carry moderate credit risk.
In the Indian context, debt instruments rated 'BBB-' and above are classified as investment grade ratings.


Classification of Persons Authorised to deal in the foreign exchange

Sr.

No.

Present category

Entities

Revised category

Major Activities

1.

Authorised Dealer

  • Commercial Banks
  • State Co-op Banks
  • Urban Co-op Banks

Authorised Dealer - Category - I

All current and capital account transactions according to RBI directions issued from time-to-time.

(No Change).

2.

-

  • Upgraded FFMCs
  • Co-op. Banks
  • Regional Rural Banks (RRBs)
  • Others

Authorised Dealer - Category - II

Specified non-trade related current account transactions as at paragraph 3 below as also all the activities permitted to Full Fledged Money Changers. Any other activity as decided by the Reserve Bank.

3.

-

  • Select Financial and other Institutions

Authorised Dealer - Category - III

Transactions incidental to the foreign exchange activities undertaken by these institutions. (No Change)

4.

Full Fledged Money Changers (FFMCs)

  • Dept. of Posts
  • Urban Co-op. Banks
  • Other FFMCs

FFMCs

Purchase of foreign exchange and sale for private and business visits abroad.

(No Change)


 Reference: 
"Authorised Persons- Categorisation" RBI Press Release No. RBI/2005-06/314 Dated March 6, 2006 

Guidelines for Licensing of Small Finance Banks in the Private Sector:

"Guidelines for Licensing of Small Finance Banks in the Private Sector" - RBI 

"Authorised Dealer Category-I License eligibility for Small Finance Banks" - RBI Press Release No. RBI/2022-23/104 Dated August 8, 2022  

"Review of Minimum Investment Grade Credit Ratings for Deposits of NBFCs" - RBI Press Release No. RBI/2022-23/37 Dated May 2, 2022 

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