Reserve Bank of India (Small Finance Banks – Licensing) Guidelines, 2025
UR
- Applies toCompanies and groups seeking a small finance bank licence
- StatusIn force
- IssuedNov 28, 2025
- Amendmentsnone tracked
- Length37 points in 4 sections · 3 min read
The four dates on this rule
- PublishedNov 28, 2025The day RBI put this document out. This is the same day as the Issued date on this rule.
- Starts to applyNot statedNot stated separately in this document. Read the rule itself before you assume a start date.
- Time to get readyNot statedCannot be worked out until the day it starts to apply is known.
- Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.
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Numbers to remember
| ten years | A promoter must show ten years of senior banking experience. RBI Para 8 |
| 25 per cent | It must open 25 per cent of branches in unbanked rural areas within a year. RBI Para 15 |
| ₹300 crore | A small finance bank needs at least ₹300 crore paid-up capital. RBI Para 19 |
| ₹150 crore | It must reach ₹150 crore net worth from the date it opens. RBI Para 19 |
| 15 per cent | It must maintain 15 per cent capital adequacy on a continuous basis. RBI Para 20 |
| 7.5 per cent | Tier I capital must be at least 7.5 per cent of assets. RBI Para 20 |
| 40 per cent | Promoters must hold 40 per cent of shares for five years. RBI Para 21 |
| 26 per cent | That stake must fall to 26 per cent within 15 years. RBI Para 21 |
| eight years | The bank must list its shares within eight years of starting. RBI Para 25 |
| 5 per cent | Buying 5 per cent or more of its shares needs RBI's approval. RBI Para 27 |
| 60 per cent | It must direct 60 per cent of adjusted credit to priority-sector lending. RBI Para 29 |
| 50 per cent | At least 50 per cent of its loans must be ₹25 lakh or below. RBI Para 30 |
| ₹25 lakh | The ₹25 lakh loan limit applies borrower by borrower. RBI Para 30 |
| 18 months | Promoters must meet every condition within 18 months of approval. RBI Para 45 |
What it says
How firm is each point
Stated by RBI — RBI’s own paragraph says this. We have only made it plainer.
Our reading — BankPulse read RBI’s paragraph and shortened it. The paragraph is the authority, not this line.
Needs judgement — RBI leaves this to the bank to settle, so nobody can give you a fixed number here.
Must know
1. Registers as a public company
The bank must register as a public limited company.
2. Ten years' banking experience needed
A promoter must show ten years of senior banking experience.
3. NBFCs and MFIs can convert
NBFCs, MFIs and Local Area Banks may convert into small finance banks.
4. No joint promoter ventures
Different promoter groups cannot jointly set up one small finance bank.
5. Shell banks barred
A shell bank cannot promote or set up a bank.
6. Rural branches within a year
It must open 25 per cent of branches in unbanked rural areas within a year.
7. Name must show its status
Its name must include the words "Small Finance Bank".
8. ₹300 crore minimum capital
A small finance bank needs at least ₹300 crore paid-up capital.
9. ₹150 crore net worth needed
It must reach ₹150 crore net worth from the date it opens.
10. 15% capital adequacy required
It must maintain 15 per cent capital adequacy on a continuous basis.
11. Tier I floor, 7.5%
Tier I capital must be at least 7.5 per cent of assets.
12. 40% promoter stake, five years
Promoters must hold 40 per cent of shares for five years.
13. Stake falls to 26% later
That stake must fall to 26 per cent within 15 years.
14. Listing due within eight years
The bank must list its shares within eight years of starting.
15. 26% voting-rights ceiling for all
No shareholder may hold more than 26 per cent of voting rights.
16. 5% share buys need approval
Buying 5 per cent or more of its shares needs RBI's approval.
17. Same CRR and SLR rules
It must meet the same CRR and SLR rules as other banks.
18. 60% goes to priority lending
It must direct 60 per cent of adjusted credit to priority-sector lending.
19. Half its loans stay small
At least 50 per cent of its loans must be ₹25 lakh or below.
20. ₹25 lakh cap, per borrower
The ₹25 lakh loan limit applies borrower by borrower.
21. Extra 25% risk weight applies
Converting NBFCs face a 25 per cent extra risk weight on charged assets.
22. Board needs independent-director majority
Most of the bank's board must be independent directors.
23. One bank licence per promoter
One promoter cannot hold both a universal and small finance bank licence.
24. Share limits follow Annex-I
Its share-ownership limits follow a separate RBI rulebook.
25. Cannot be another bank's BC
It cannot act as a business correspondent for another bank.
26. Non-compliance can cost the licence
Breaking these terms can mean losing the bank's licence.
27. 18 months to meet conditions
Promoters must meet every condition within 18 months of approval.
28. Approval itself lasts 18 months
RBI's initial approval expires after 18 months.
29. Directors must be fit, proper
The board must meet RBI's fit-and-proper standard.
30. UCBs need ₹50 crore
A transitioning UCB needs at least ₹50 crore net worth.
31. UCB promoters need experience
UCB promoters must be residents with ten years' banking experience.
32. UCB-path promoters keep 26%
Promoters converting from a UCB must hold at least 26% of shares.
Do it
1. High-powered grievance cell required
Every bank needs a high-powered cell for customer complaints.
2. One month to appeal
An appeal must be filed within one month of RBI's decision.
3. Apply anytime through PRAVAAH
A UCB may apply to transition at any time, through PRAVAAH.
Background
1. AIFs not accepted as promoters
Proposals from Alternative Investment Funds are not accepted as promoters.
2. Three-year bar on reapplying
A rejected applicant cannot reapply for three years.
The same subject for other kinds of institution
The same subject for other kinds of institution.
Other RBI rules for small finance banks
RBI compliance officer and compliance function rules for small finance banks 2026
RBI credit bureau reporting rules for small finance banks 2025
RBI credit card and debit card rules for small finance banks 2025
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