Is it safe to invest in small finance banks

The banking sector in India is divided into different types of banks, like Commercial Banks, Cooperative Banks, Regional Rural Banks, Payment Banks, and more. One category of banks that is witnessing consistent growth is Small Finance Banks (SFBs).

Highly competitive interest rates on products like Savings Accounts and Fixed Deposits (FDs) have made SFBs a favourable choice. But is Small Finance Bank safe for investment? Let’s find out-

What are Small Finance Banks?

Small Finance Bank (SFB) is a banking segment exclusively created by the Reserve Bank of India (RBI) to aid financial inclusion by offering basic banking services to underserved and un-served sections of society. Micros and small industries, small and marginal farmers, small business units, and people employed in the unorganized sector are target customers of SFBs.

Read More: - What is a small finance bank

Similar to Commercial Banks, SFBs lend funds and accept deposits. However, by offering loans to individuals and entities not favoured by larger banks, SFBs play a vital role in the Indian banking sector.

How Safe are Small Finance Banks?

So, are Small Finance Banks safe? Like other types of banks in India, the RBI regulates and governs SFBs. Therefore, all the banking norms, such as Statutory Liquidity Ratio Requirements, Cash Ratio Reserve Requirements, etc., apply to them. Moreover, the RBI also defines aspects like Eligibility Criteria and Mandatory Promoter Contribution for SFBs.

In other words, there are stringent regulations that SFBs must adhere to for their operations. As the RBI regulates the segment, SFBs are as safe as any other type of bank.

How Safe is AU Small Finance Bank for Investment?

AU Small Finance Bank is the Largest Small Finance Bank in India. While it was founded as AU Financiers Ltd., a Vehicle Finance Company, in 1996, it started its journey as an SFB in 2017 after receiving approval from the RBI. As of June 30, 2022, the ISO 27001 Certified Bank has 980 touchpoints in 20 Indian States and 2 Union Territories.

Renowned for consistently challenging the banking status quo in India, AU Small Finance Bank is rapidly evolving to fulfil the Digital Banking needs of the customers. AU 0101 NetBanking, AU 0101 App, Video Banking, and WhatsApp Banking are some services launched by us to offer the best-in-class banking experience to its customers.

Should You Invest in Small Finance Bank?

Based on the points discussed above, SFB, like AU Small Finance Bank, is not only safe but one of the best choices to deposit your savings and invest.

As SFBs are regulated by the RBI and must fulfil the stringent requirements defined by the Central Bank, they can be trusted with your hard-earned money. So, whether you want to open a new Savings Account or book an FD, you can choose AU Small Finance Bank to make the most of your savings.

In fact, it is the best Small Finance Bank in India that allows you to earn a high interest on a Savings Account , along with a Monthly Interest Payout facility.