KR Voting rights and transfer/ acquisition of shares: As per the Banking Regulation Act read with the gazette
notification DBR.PSBD. No. 1084/16.13.100/2016-17 dated July 21, 2016, no person holding shares of our Bank
shall exercise voting rights in excess of 26% of the total voting rights of all the shareholder in respect of private
sector bank. This will also apply to SFBs.

8. Prudential norms: The SFB will be subject to all prudential norms and regulations of RBI as applicable to
existing commercial banks. Further, the SFB will have to comply with additional conditions/ norms such as
extending 75% of its adjusted net bank credit to sectors eligible for classification as PSL by RBI, while 40% of
its adjusted net bank credit shall be allocated to different sub-sectors under PSL as per the extant PSL
prescriptions, the SFB can allocate the balance of 35% to any one or more sub-sectors under PSL where it has
competitive advantage, maximum loan size and investment limit exposure to a single and group obligor being
restricted to 10% and 15% of its capital funds, respectively, at least 50% of its loan portfolio should constitute
loans and advances of up to 22.50 million, etc. The SFB is also precluded from having any exposure to its
promoters, major shareholders (who have shareholding of 10% of paid-up equity shares in the bank), and
relatives (as defined in Section 2 (77) of the Companies Act, 2013 and rules made thereunder) of the promoters
as also the entities in which they have significant influence or control (as defined under Accounting Standards
AS 21 and AS 23).

9. Corporate Governance: The Board of the SFB should have a majority of independent directors. Further, the
SEB will have to comply with the corporate governance guidelines including ‘fit and proper” criteria for directors
as issued by RBI from time to time.

10. Others:

. Individuals (including relatives) and entities other than the promoters will not be permitted to have
shareholding in excess of 10% of the paid-up equity capital. In case of NBFCs or MFIs converting to
an SEB, if shareholding of entities (other than the promoters) in the NBFC is in excess of 10% of the
paid-up equity capital, RBI may consider providing time up to 3 years for the shareholding to be brought
down to 10%.

. An SFB cannot be a Business Correspondent (“BC”) for another bank. However, it can have its own
BC network.
. A promoter of an SFB cannot be granted licenses for both universal bank and small finance bank even

if the proposal is set to them up under the non-operative financial holding company structure.

. If an SFB wishes to transit into a universal bank, it will have to apply to the RBI for such conversion
after completion of five years of operations and fulfil the minimum paid-up capital / net worth
requirement as applicable to universal banks and also comply with other criteria prescribed in this
regard.

. The operations of the bank should be technology driven from the beginning, conforming to generally
accepted standards and norms; while new approaches (such as for data storage, security and real time
data updating) are encouraged, a detailed technology plan for the same shall be furnished to RBI.

. The compliance of terms and conditions laid down by RBI is an essential condition of grant of licence.
Any non-compliance will attract penal measures including cancellation of licence of the bank.

Guidelines for ‘on tap’ Licensing of Small Finance Banks in the Private Sector dated December 5, 2019 (“On-Tap
Licensing Guidelines”) as amended.

The RBI had, post review of the performance of existing small finance banks and to encourage competition amongst
small finance banks, issued the Draft Guidelines for ‘on tap’ Licensing of Small Finance Banks in the Private Sector dated
September 13, 2019, and subsequently, post consideration of responses received, issued the On-Tap Licensing Guidelines
on December 5, 2019. Pursuant to the On-Tap Licensing Guidelines, the following are eligible promoters: (i) resident
individuals/ professionals (Indian citizens), singly or jointly, each having at least 10 years of experience in banking and
finance at a senior level; and (ii) companies and societies in the private sector, that are owned and controlled by residents
(as defined in FEMA Regulations, as amended from time to time), and have a successful track record of running their
businesses for at least a period of five years. Further, existing NBFCs, MFIs and local area banks in the private sector
that are controlled by residents (as defined in FEMA Regulations, as amended from time to time), and have a successful
track record of running their businesses for at least a period of five years, can opt for conversion into SFBs after complying
with applicable law. The SFB is required to be registered as a public limited company under the Companies Act and

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