The Reserve Bank of India (RBI) on Friday urged small financing banks (SBFs) to continue to evolve in line with their unique banking licence, which allows them to grow their capital base proportionately.
Deputy governors MK Jain and M Rajeshwar Rao met with Managing Directors (MDs) and Chief Executive Officers (CEOs) of SFBs, according to a statement from the RBI.
The evolution of their business model, as well as the need for improving board oversight and professionalism, improving assurance functions, and augmenting IT infrastructure, were discussed earlier this year at a meeting with heads of SFBs, which took place in August of last year, taking into account the stress build-up due to COVID-19 and the required mitigation measures.
"After taking stock of the developments in the sector, the focus on giving due importance to these topics for sustainable growth of SFBs, notably their business model and governance, was emphasised in the meeting held today (Friday)," RBI stated. SFBs should continue to evolve in accordance with the differentiated banking licence granted to them, which includes proportionate capital base growth, it said.
Asset quality concerns, such as a feasible portfolio mix and stronger customer service and grievance redressal structure with equivalent IT resilience, were considered, among other things.
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