ESAF applies for final licence for small finance bank

Kerala-based ESAF Microfinance, which had last year received in-principle approval to start a small finance bank, has now applied for the final licence.

“We gave an application to RBI (Reserve Bank of India) about a month ago for the final licence. We will start operations within 60 days of receiving the final licence,” said A G Varughese, executive vice-president, ESAF Microfinance.

K Paul Thomas, chairman of the ESAF group, will be the managing director and chief executive officer of the bank. Varughese added they had already invested Rs 110 crore in the banking operation.

The microfinance institution (MFI) has presence in 10 states and will start banking operations with the 10 branches. The bank will aim at 85 branches by March-end and 110 within one year of operations. Currently, the MFI has a customer base of more than one million and assets under management of Rs 2,200 crore.

ESAF was among the 10 players that had received in-principle approvals to start small finance banks in September last year.

Capital Local Area Bank had received the final licence and started operations. Equitas also received the final licence from the regulator.

These small finance banks will be similar to the commercial lenders and will undertake basic banking activities such as accepting deposits and lending to the un-served and under-served sections. Their loan size and investment limit exposure to single and group obligators cannot be more than 10 per cent and 15 per cent of their capital, respectively.

Also, at least 50 per cent of their loan portfolio has to include loans and advances of up to Rs 25 lakh. The regulator has said these small banks can convert themselves into universal banks in due course. However, the transition will depend on RBI approval.