Small Finance Banks in India: List, Guidelines & Operations | Top 10 Small Finance Banks
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Small Finance Banks in India

    What are Small Finance Banks?

    Small Finance Banks have emerged as a new category of banks in India that cater primarily to the financially unserved and under-served sections of the society. These banks have been set up with a strategic objective of promoting financial inclusion by offering basic banking services to the unbanked and under-banked population and making formal credit available to this segment. The Reserve Bank of India (RBI) granted licenses to Small Finance Banks in 2015 and since then, they have come a long way in providing banking services to the masses. In subsequent years, RBI has granted two additional SFB licenses taking the total SFBs in the country to 12.

    To gain a deeper understanding of the banking landscape, we recommend exploring the "Difference Between Commercial Bank and Small Finance Bank"

    In this blog, we will discuss the Small Finance Banks in India, requirements for becoming a small finance bank and their operations so far.

     

    List of Small Finance Banks (Alphabetical order):

    No. Small Finance Bank Foundation Date Operations Initiation Date as Small Finance Banks Erstwhile Classification
    1 AU Small Finance Bank 1996 2017 Asset Financing NBFC
    2 Capital Small Finance Bank 2000 2016 Local Area Bank
    3 Equitas Small Finance Bank 2007 2016 NBFC – MFI (Micro Financing Institution)
    4 ESAF Small Finance Bank 1992 2017 NBFC – MFI (Micro Financing Institution)
    5 Fincare Small Finance Bank 2007 2017 NBFC – MFI (Micro Financing Institution)
    6 Jana Small Finance Bank 2008 2018 NBFC – MFI (Micro Financing Institution)
    7 Northeast Small Finance Bank 2017 2018 NBFC – MFI (Micro Financing Institution)
    8 Shivalik SFB 2009 2017 NBFC – MFI (Micro Financing Institution)
    9 Suryoday Small Finance Bank 2005 2017 NBFC – MFI (Micro Financing Institution)
    10 Utkarsh Small Finance Bank 2009 2017 NBFC – MFI (Micro Financing Institution)
    11.  Unity Small Finance Bank  2021 2021  Took over Punjab & Maharashtra Cooperative Bank (PMC)
    12. Ujjivan Small Finance Bank 2005 2017 Urban Co-operative Bank

    Explore the multitude of advantages awaiting you by opening an account in a Small Finance Bank as we delve into the article on “7 Key Benefits of Banking with a Small Finance Bank.

     

    Guidelines for operating Small Finance Banks:

    1. Capital requirements:

    The minimum paid-up equity capital for small finance banks should be INR 200 crore.

     

    2. Promoter's contribution:

    The promoter(s) of a small finance bank should hold a minimum of 40% of the paid-up equity capital, which should be locked in for a period of five years from the date of commencement of business.

     

    3. Foreign shareholding:

    The foreign shareholding in Small Finance Banks should be in accordance with the Foreign Direct Investment (FDI) policy for private sector banks, which is capped at 74%.

     

    4. Priority sector lending:

    Small Finance Banks must extend 75% of their Adjusted Net Bank Credit (ANBC) to the priority sector.

     

    5. Target audience:

    Small Finance Banks should focus primarily on providing credit and other financial services to small businesses, farmers, micro and small industries, and other unbanked or underserved sections of the population.

    In the blog article "Are Small Finance Banks Good for Investment? Here's What You Should Know," discover essential information to help you make informed decisions about investing in Small Finance Banks.

     

    6. Loan size and concentration:

    SMALL FINANCE BANKS in order to ensure that the small finance banks extend loans primarily to small borrowers, at least 50 per cent of its loan portfolio should constitute loans and advances of up to ₹ 25 lakh on an ongoing basis at the Borrower level. 7. Branch expansion: SMALL FINANCE BANKS s must ensure that at least 25% of their branches are in unbanked rural areas.

     

    7. Listing requirements:

    SMALL FINANCE BANKS s must be listed on the stock exchange within three years of reaching a net worth of INR 500 crore for better transparency and accountability.

     

    8. Conversion to a universal bank:

    SMALL FINANCE BANKS are allowed to apply to RBI for a transition to a universal bank after a minimum of five years of successful operations and meeting other necessary criteria set by the RBI.

    Curious about the credit card offerings of Small Finance Banks? Find out the eligibility and potential options in our article titled "Are Small Finance Banks Eligible to Issue Credit Cards?"

     

    Operations so far

    Small Finance Banks have played a significant role in addressing the issue of financial inclusion in India by bringing banking services to remote and underdeveloped geographies of the country. They cater to the needs of small businesses, micro-enterprises, and low-income households, who were previously excluded from the formal banking system. Small Finance Banks have also enabled greater access to credit, savings, and investment opportunities for these marginalized communities.

    With their innovative product offerings and customer-centric approach, Small Finance Banks are fast emerging as a preferred choice for people who are looking for easy and convenient banking solutions.

     

    Conclusion

    In conclusion, Small Finance Banks have emerged as a key player in the Indian banking landscape by promoting financial inclusion and providing basic banking services to the underbanked and underserved sections of the population. Their unique objectives and guidelines have helped them stand out in the crowded banking sector, with a focus on extending credit to small businesses, micro-enterprises, and low-income households. With their customer-centric approach and innovative product offerings, Small Finance Banks are likely to play an even more significant role in the future of banking in India, providing easy and convenient banking solutions to millions of people across the country.


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