The Reserve Bank of India (RBI) has announced that the North East Small Finance Bank, also known as RGVN Microfinance Ltd., has commenced its operations. RBI’s approval for RGVN was provided in September 2015, and RGVN was one of the 10 applicants that received in-principle approval for setting up a small finance bank. The license to operate as a small finance bank was issued to RGVN under the Banking Regulation Act of 1949.
RBI’s approval to the microfinance organization was based on many factors such as financial soundness, ability to raise capital, status on due-diligence reports, proposed business plan, etc. Most importantly, RBI also considered the bank’s potential to reach into various unbanked and underserved regions of the country.
As a small finance institution, North East Small Finance Bank will accept deposits and lend loans to various entities in the unorganized sector. These entities include small businesses, small industries, individual farmers, and other micro units in various unbanked regions of the country. In most cases, microfinance beneficiaries are low-income earners who will gain a lot from this additional financial support.
Microfinance industry aims to improve the lives of people in rural India by offering them loans to improve their livelihood. These loans are typically offered for farming, animal husbandry, and a range of other small business activities in the rural parts of India. Compared to corporate loans offered by banks, microfinance has lesser non-performing assets and bad debt.
North East Small Finance Bank is based in Guwahati and operates primarily in the northeastern states of the country. The bank spearheads the country’s financial inclusion efforts in the northeastern region. It originally operated as a non-banking finance corporation (NBFC) and served more than 200 thousand customers. By operating a small finance bank, RGVN expects to widen its reach in the region.