At least three microfinance firms from eastern India and 30 across the country are likely to apply for the ‘on tap’ small finance bank licence announced by the RBI.

According to data sourced from Equifax, as on September 30, 2019, there are 85 NBFC micro finance institutions (MFIs) with a portfolio outstanding of Rs 62,960 crore covering 3.49 crore active loan accounts.

According to industry officials, Arohan and Village Financial Services from Bengal and Annapurna from Odisha could consider conversion to small finance banks as Ujjivan, Suryoday and Jana SFB have done in the past.

Small finance banks primarily extend loans to small borrowers. At least 50 per cent of their portfolio will constitute loans and advances of up to Rs 25 lakh. The minimum net worth of such banks has been set at Rs 100 crore from the date of commencement of business. But they will have to increase this to Rs 200 crore within five years from that date.

The paid-up equity capital for on tap licences has been fixed at Rs 200 crore and the banks are required to maintain a capital adequacy of 15 per cent of the risk weighted assets.

The promoter holding has been set at 40 per cent of the paid-up equity capital with a lock-in period of five years from the commencement of business. Once the net worth of the bank reaches Rs 500 crore, the regulator has mandated listing of the bank within three years.

The MFIs feel a decision will involve considering several aspects such as core banking, human resources, capital requirements and geographic spread. But the upside is access to deposits that could lower cost of funds.

“We will explore the opportunity. But, the board will take a final call whether it will be now or later,” said Kuldip Maity, MD and CEO of Village Financial Services.

“In our case, depending upon the size and the time, we will take a decision,” said Manoj Nambiar, MD of Arohan Financial Services.

“From the regulations, it is clear that the RBI is very much bullish on the SFB model and MFIs are fit for this model,” said Pranab Rakshit, vice-president AMFI-WB, an industry body of MFIs. The association will hold an industry summit later this month.