RAS question
Which Small Finance Bank received RBI in-principle approval to transition into a universal bank?
Correct answer: (D) AU Small Finance Bank.
AU Small Finance Bank received the Reserve Bank of India's in-principle approval to transition from a Small Finance Bank into a Universal Bank.
Explanation
The answer is AU Small Finance Bank because the Reserve Bank of India decided to grant it in-principle approval for transitioning from a Small Finance Bank to a Universal Bank. The Reserve Bank of India press release annexed to AU Small Finance Bank's stock exchange disclosure also explains the policy context: the 2014 Small Finance Bank licensing guidelines created a transition path, subject to minimum paid-up capital or net worth for universal banks, a satisfactory track record as an SFB for at least five years, and RBI due diligence. The AU disclosure adds that, with this approval, AU became the first Small Finance Bank to receive in-principle approval to become a Universal Bank. This is why the question is not asking about any SFB in general; it is testing the specific RBI-approved transition case.
Why the other options are wrong
- (A) Jana is not the right choice because AU, not Jana, was the SFB that received this in-principle approval and became the first to do so.
- (B) Ujjivan is wrong because AU Small Finance Bank received RBI's in-principle approval, while Ujjivan is not identified as the first such approved SFB.
- (C) Equitas is wrong because it had not yet converted, whereas the approval concerns AU's transition from an SFB to a Universal Bank.
Concept
This tests banking-sector regulation under Indian Economy, especially RBI's licensing framework for differentiated banks and their transition to universal banks. It recurs in RAS because small finance banks, financial inclusion, and RBI regulatory approvals are regular current-economy themes.