IIBF SFB key terms

A scheduled bank licensed by RBI under the Banking Regulation Act, 1949, that must hold at least 75% of deposits in small-ticket accounts and lend mainly to small borrowers and unserved segments.

An RBI policy under which eligible applicants may apply for an SFB licence at any time, with no fixed application window, subject to continuous compliance with fit-and-proper and capital criteria.

Standards RBI applies to assess the integrity, track record, financial soundness and competence of promoters, directors and senior management of a proposed or existing bank.

The minimum equity capital that the promoter group must bring into an SFB, initially at 40% of paid-up capital, to be locked in and diluted over a prescribed period.

A full-service banking licence permitting lending of any ticket size and to any sector, unlike an SFB licence which carries small-ticket deposit and lending restrictions.

The requirement that an SFB keep at least 75% of its demand and time liabilities in deposit accounts of size up to Rs 2 lakh, reviewed by RBI from time to time.

Lending that RBI mandates to specified sectors such as agriculture, micro enterprises, education and weaker sections, with SFBs required to meet a 75% PSL target on adjusted net bank credit.

The base used to compute PSL targets, being net bank credit plus outstanding deposits under non-resident external accounts and certain other eligible amounts as prescribed by RBI.

A PSL sub-category covering small and marginal farmers, scheduled castes and tribes, micro enterprises, women beneficiaries and other groups that RBI specifies as disadvantaged.

Tradable instruments issued by eligible entities that allow banks to buy priority sector lending achievement to meet shortfalls against mandated targets.

The process of ensuring affordable and timely access to formal financial services, including deposits, credit, insurance and payments, for underserved and low-income populations.

An entity or individual engaged by a bank to deliver financial services at customer doorsteps on its behalf, acting as an agent under RBI-approved arrangements.

A no-frills savings account offering basic banking facilities free of charge and without any minimum balance requirement, aimed at expanding deposit access.

Total liabilities of a bank to its customers that are payable on demand or after a fixed period, used as the base for computing cash reserve and statutory liquidity requirements.

The share of a bank's net demand and time liabilities that must be held as cash balances with RBI, earning no interest and usable for monetary control.

The minimum proportion of net demand and time liabilities that a bank must hold in approved liquid assets such as government securities, cash or gold.

The organised effort by a bank to attract and retain customer deposits through products, pricing, distribution and service quality, forming its core funding base.

The practice of managing mismatches between the maturities and interest sensitivities of a bank's assets and liabilities to protect liquidity, earnings and capital.

A prudential standard requiring a bank to hold high-quality liquid assets sufficient to cover net cash outflows over a 30-day stress period.

The ratio of a bank's eligible capital to its risk-weighted assets, measuring the cushion available to absorb losses and comply with Basel norms.

Bank exposures multiplied by regulatory risk weights that reflect the credit, market and operational risk attached to each category of asset.

Supervisory limits and standards set by RBI on capital, asset classification, provisioning, exposure and liquidity to keep banks financially sound.

The risk that a borrower or counterparty fails to meet repayment obligations, causing loss to the lender through default or deterioration in credit quality.

The risk of loss from inadequate or failed internal processes, people, systems or external events, including fraud and business disruption.

The exposure of a bank's earnings and capital to changes in market interest rates because of repricing mismatches between assets and liabilities.

The structured assessment of a borrower's creditworthiness, repayment capacity, collateral and purpose before a loan is sanctioned, using financial and non-financial data.

Estimation of a borrower's expected inflows and outflows to judge whether the proposed loan instalments can be serviced from regular income or business surplus.

A loan or advance on which principal or interest has remained overdue for more than 90 days, requiring classification, provisioning and recovery action.

The amount a bank sets aside from profits to absorb expected loan losses, computed according to RBI's asset classification and provisioning norms.

Provision of small loans, savings and related services to low-income households and micro enterprises, typically without conventional collateral and with frequent repayment.

A small group of borrowers who guarantee each other's loans, allowing members to access credit on mutual accountability instead of physical collateral.

A microfinance method in which loans are given to individuals within a group whose members share responsibility for repayment, reducing screening and monitoring costs.

An entity providing microcredit and related financial services to low-income clients, often regulated by RBI when it operates as an NBFC-MFI.

The mandatory process of identifying and verifying a customer's identity and address, and understanding the purpose of the account relationship, before and during onboarding.

Ongoing measures a bank takes to establish customer identity, assess risk and monitor transactions, including enhanced checks for higher-risk customers.

The legal and procedural framework requiring banks to detect, report and prevent the laundering of proceeds of crime through the financial system.

A confidential report filed with the Financial Intelligence Unit when a bank suspects that a transaction involves proceeds of crime or terrorist financing.

Measures taken by banks to prevent funds from reaching terrorist individuals or organisations, including sanctions screening and targeted transaction monitoring.

The natural person who ultimately owns or controls a customer or the account, identified through ownership thresholds and control tests under KYC rules.

The framework of controls, monitoring, investigation and reporting a bank uses to prevent, detect and respond to fraud across its products and channels.