What is Small Finance Bank? | Ujjivan SFB IPO (with ENG subtitles) #Finance

Hello friends, welcome to Yadnya Investment Academy. Today we will see what are small Finance banks. You must have seen recently that Ujjivan

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance, the subsidiary of this company, Ujjivan Finance

small Finance bank, the listing of this subsidiary is coming, the IPO is coming between 2-4 December. There is a price band between 36-37, the lot size is 400. So there is a

lot of excitement, we have also tried to present a small analysis in front of you. In the coming days, we will present comparisons also but many queries have started coming that what is small none;">Finance bank? Why this concept has been developed? So to explain this, we have come in front of you with this CashNews.co. So what are small Finance

banks? We have big banks like HDFC bank, State Bank of India, ICICI bank We have Yes bank, we have Kotak bank, we have a lot of banks. Still why are we coming to small none;">Finance banks in India? So normally what happens is that commercial banks, Big banks pay more attention to big Profits and small unserved or underserved customers like farmers, micro and small businessmen or people who run small businesses etc. they do not get

Credit immediately. So for that they have promoted small Finance banks. Earlier there were a lot of micro

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance institutions which used to serve them and charged an exorbitant type of interest. We had told you an example that if someone wants 1000 rupees for 4-5 days and you say that I will give you 1000 rupees, after 4-5

days give me 1100-1200 rupees, so he thinks that he is taking 100-200 rupees extra from me. But if you Yield it annually then it will become very big. So RBI thought that these things should not be like this, proper structuring should be there for this also. So they said

let’s do one thing, we bring a new ruling of small Finance banks which will be under RBI, completely properly RBI rules and regulations will be managed. So then all

these things started developing there. So they started giving licenses, around 70-80 people showed aspirations to give us the license to become a small Finance bank. So RBI

gave license to 10-11 people from which Ujjivan small Finance bank is one. So normally their objective is to serve unserved and underserved categories of our society. So they

give Loans to them or they should have options for Savings. So here their further objective should be provision of Savings vehicle. So first is provision of Savings vehicles. Now what is provision of Savings

vehicles? You open a Savings account, current account, if you want you can do fixed deposits. So start saving. Once you start having Savings then automatically Assets will be visible in front. And your financial profile will be a disciplined

profile. So for this provision of Savings. And second objective as we told that they should have proper Credit access. If you have opened a Savings account, current account then you will start going to the bank. Then you will feel that I need some

Loan to help my business. Then if your Savings profile is built, your account is developed then bank gives you Loans from there. What is Credit access? Credit means banks that give you Loans or

bank advances are used in different names. You must have seen that this name is familiar to us but we are not familiar with the name of Credit or advance. So we have tried to explain all this in front of you. So who should get this Credit access? Small and marginal

farmers or micro and small enterprises should get this Credit access. All this started with a basic objective. So what are the rules and regulations applicable to small none;">Finance banks? Small Finance banks follow all the rules and regulations of RBI. Like if we see according to private sector banking then only FDI’s

limit is 74%. In this also foreign direct investment can be done. There is no problem in that. Second, at least 75% of the lending should be done by the priority sector. Normally, this priority sector lending is done in a place where commercial banks are not interested. But here the percentage is

100 rupees total Loan book. So 75 rupees of the Loan book should be done by private sector lending. Private sector lending means all the unserved and underserved sectors like farming, micro and small enterprises. So they should be the major funding here. Normally,

commercial banks are not interested in small amounts. They think we will invest in bigger Loans. But here they have no restriction that you cannot invest in big Loans. So their focus should be here only. That is why 75% of the lending will be done by the priority

sector. So automatically these banks will always be retail oriented banks. Like ICICI, SBI, Yes bank, these banks have majorly faced problems in wholesale banking. These are the Loans that have been given to them where NPA’s pressure has been created. Like we made a

CashNews.co on Ujjivan small Finance bank, we told you that 0.9% is gross NPA and 0.3% is net NPA. You can understand that this is the reason for the decrease. Because here

the lending is retail oriented and they have maintained their Credit profile automatically. And from there their business also runs smoothly. So you should always see this. Then 50% of the Loans that they have given should be up to 25 lakhs. So this means that the

Loans given should be below 25 lakhs. So this is another way to keep them in retail lending. 75% of the lending is done by the priority sector. So automatically this condition will be approved. Rest, they can accept any number of deposits, you can keep money in any saving account,

current account. There are no restrictions available here. So you should see all these things. That’s why you must have seen that in many urban areas, they are opening their bank branches. There is a good business growth here. RBI has told them that from the time they have started the

operation, you will have to do listing within 3 years. Why do you have to do listing? Because these promoters have to bring their stake down. So there are some conditions of promoters that we will tell you now. Like the first condition, individuals and professionals who have 10 years of experience

in NBFCs or banking. NBFCs means non-banking financial companies or in banking, They can start. For this, the paid up Equity Capital will cost at least 100 crores. And out of that 100 crores, at least 40% of the Capital should be put in by the

promoter initially. And in the next 12 years, the promoter should bring his stake below 26%. So these are some conditions that RBI has kept with them. We have told you about FDI. All the rules and regulations for small #1a73e8; text-decoration: none;">Finance banks are available. This is an interesting field of small Finance banks. So we want you to watch closely. In the coming

time, we will try to compare these listed banks with Ujjivan small Finance banks. Because the IPO is coming, it is better that many more things open up in front of you. So

that you can also decide which bank you should invest in. If you look at it according to the business profile, due to small Loans, the net interest margins are very high. Like we had explained to you earlier that if you are giving 10,000 rupees to someone for 6 months and he is

returning you 1100 rupees after 6 months, then that 10% interest may be on absolute terms but on annualized terms it becomes 20% and there the margins improve a lot. And if NPAs are also keeping these banks under control, then it is a very good thing. So we hope you liked this small CashNews.co.

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