RBI prescribes eligibility norms for small finance banks looking to deal in forex

The Reserve Bank of India(RBI) has notifies Category-I License eligibility norms for small finance banks looking to deal in forex.

RBI Stated that the small finance banks which have completed two years of operations and have a minimum net worth of Rs 500 crore can deal in foreign exchange.

“In refer to the ‘Guidelines for Licensing of Small Finance Banks in Private Sector’ dated November 27, 2014 and the ‘Guidelines for ‘on-tap’ Licensing of Small Finance Banks in Private Sector’ released by Reserve Bank on December 5, 2019.” RBI Prescribed Authorised Dealer Category-I License eligibility for Small Finance Banks.

In terms of paragraph 4 of the aforesaid Licensing Guidelines, a small finance bank (SFB) can also become Authorised Dealer Category-II in foreign exchange business for its clients’ requirements.

It has been decided that all the scheduled SFBs, after completing at least two years of operations as Authorised Dealer Category-II, will be eligible for Authorised Dealer Category-I licence, subject to compliance with the eligibility norms given in the Annex-I, in order to give SFBs more flexibility to meet their customers’ foreign exchange business requirements.

To apply for an Authorised Dealer Category-I licence, qualified SFBs should proceed to the Foreign Exchange Department, Central Office, Reserve Bank of India with their applications and any necessary supporting documentation, as listed in Annex-II.

Profit in the past two years and a net NPA rate of no more than 6% over the previous four quarters are additional requirements for entry into the forex market.