B’lore based Ujjivan Small Finance Bank starts operation

Mumbai, Feb 2 (KNN) Bengaluru based Ujjivan Small Finance Bank Limited has started is operations as a small finance bank with effect from February 1, 2017. The move is likely to meet the credit needs of MSME sector.

The Reserve Bank has issued a licence to the bank under Section 22 (1) of the Banking Regulation Act, 1949 to carry on the business of small finance bank in India.

Ujjivan Financial Services Private Limited, Bengaluru was one of the ten applicants which were issued in-principle approval for setting up a small finance bank on September 16, 2015.

On January 23, 2016, two small finance banks- - Utkarsh Small Finance Bank Limited and Suryoday Small Finance Bank Limited – had commenced operations.

The Committee on Financial Sector Reforms (Chairman: Dr. Raghuram G. Rajan), 2009 had examined the relevance of small banks in the Indian context. The Committee had opined that there was sufficient change in the environment to warrant experimentation with licensing of small banks.

It recommended allowing more entry to private well-governed deposit-taking small finance banks (SFBs) offsetting their higher risk from being geographically focussed by requiring higher capital, a strict prohibition on related party transactions, and lower allowable concentration norms.

In his Budget Speech in 2014-2015, the Finance Minister had said that the RBI will create a framework for licensing small banks and other differentiated banks. Differentiated banks serving niche interests, local area banks, payment banks etc. are contemplated to meet credit and remittance needs of small businesses, unorganised sector, low income households, farmers and migrant work force. (KNN Bureau)