The Reserve Bank of India (RBI), on November 28, 2025, issued the Reserve Bank of India (Small Finance Banks – Licensing) Guidelines, 2025, to govern ‘on-tap’ licensing and regulation of private sector Small Finance Banks (SFBs). The Guidelines consolidate eligibility and fit-and-proper criteria for promoters, permissible corporate structures (including NOFHC / NBFC–CIC routes), capital and promoter contribution norms, scope of permitted activities, prudential requirements, branch authorisation (including a one-year obligation to open at least 25% of outlets in unbanked rural centres), conversion pathways for NBFCs/MFIs/PBs/UCBs, and application/approval procedures.
The Guidelines prioritise financial inclusion: SFBs are to focus on deposits and credit for unserved/underserved segments — small business units, small & marginal farmers, micro & small industries and the unorganised sector — while being allowed limited non-risk-sharing distribution activities and Authorised Dealer Category-II FX operations (with a path to AD-I after meeting strict criteria). Promoter restrictions exclude joint ventures of promoter groups, large industrial houses, AIFs and shell banks; preference is given to local or regionally focused applicants, with regulatory safeguards to prevent commingling of promoter group activities.
Promoters must meet ‘fit and proper’ tests and may set up the SFB under an NOFHC or an NBFC–CIC where applicable; SFBs are prohibited from creating subsidiaries, must ring-fence promoter group activities, and comply with detailed governance, compliance and reporting requirements. The Guidelines include annexures, templates and application procedures and envisage a five-year stabilization review to consider further liberalisation.
[Notification No. RBI/DOR/2025-26/175]
