Capital Small Finance Bank Limited, India’s 1st Small Finance Bank, started operations on April 24, 2016. Capital Local Area Bank, along with nine other entities, was granted in-principle approval by the Reserve Bank of India to set up ‘Small Finance Bank’ on September 16, 2015.
Capital Local Area Bank, the largest Local Area Bank in the country, before conversion to ‘Small Finance Bank’ has been into operations for last 16 years with excellent performance in all spheres. The Bank has been operating in three contiguous Districts of Jalandhar, Kapurthala and Hoshiarpur in Punjab for the initial 13 years. In January 2013, the Reserve Bank of India accorded the approval for expansion in the Bank’s area of operation to two more Districts of Ludhiana and Amritsar in Punjab.
The Bank pioneered in bringing modern banking facilities to the rural areas at low cost. The Bank introduced 7-Day branch banking with extended banking hours since its first day of operations. The focus to serve common man and the local touch advantage has given the Bank a competitive edge over other banks operating in the region. Within a short period, most of the branches become market leaders of their respective centres. The Bank is providing safe, efficient and service oriented repository of savings to the local community while reducing their dependence on moneylenders by making need based credit easily available.
The Bank transitioned from a Local Area Bank to Small Finance Bank with 47 Branches. In a short span, 103 new Branches have become operational, taking the total number of Branches to 150. After establishing a strong footprint in the state of Punjab, the Bank has now started expansion to the states of Delhi, Haryana, Rajasthan along with Union Territory of Chandiagarh.
Capital Small Finance Bank has been granted Scheduled Status by the Reserve Bank of India vide Notification dated February 16, 2017.The total business of the Bank has crossed Rs.7,600 crores with over 6,90,000 accounts. The Bank has 80% of its business in rural and semi urban areas, with priority sector lending of 81.28% of the Adjusted Net Bank Credit as on March 31, 2019. The Bank is extending loans primarily to small borrowers. As on March 31, 2019, 54.10% of the total advances are up to the ticket size of Rs.25 lacs.
Conversion of the Bank to Small Finance Bank has removed the geographical barriers for expansion, resulting in exponential growth of the Bank in all spheres. The business of the Bank is expected to grow to Rs.18,000 crores by March 31, 2023 with 265 number of Branches.
Small finance banks are a type of nichebanks in India. Banks with a small finance bank license can provide basic banking service of acceptance of deposits and lending. The aim behind these to provide financial inclusion to sections of the economy not being served by other banks, such as small business units, small and marginal farmers, micro and small industries and unorganised sector entities. The small finance bank, in furtherance of the objectives for which it is set up, shall primarily undertake basic banking activities of acceptance of deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities. It can also undertake other non-risk sharing simple financial services activities, not requiring any commitment of own fund, such as distribution of mutual fund units, insurance products, pension products, etc. with the prior approval of the RBI and after complying with the requirements of the sectoral regulator for such products. The small finance bank can also become a Category II Authorised Dealer in foreign exchange business for its clients’ requirements. It cannot set up subsidiaries to undertake non-banking financial services activities.
The annual branch expansion plans of the small finance banks for the initial five years would need prior approval of RBI. The annual branch expansion plans should be in compliance with the requirement of opening at least 25 per cent of its branches in unbanked rural centres (population up to 9,999 as per the latest census.