Small Finance Banks in India

Small Finance Banks in India

Small Finance Banks

Small Finance Banks have been set up to provide financial inclusion to those people or businesses who have not been served by other banks such micro and small industries, small farmers and other unorganized sector entities. These banks need to provide 75% of their lending to priority sector which includes agriculture and small businesses. At least half of the loan should be below Rs. 25 lakhs.

Small finance banks can provide basic banking facilities like deposit and lending with lending more inclined towards mid and low income borrowers. Many small finance banks are providing higher interest rate to attract more amount deposit in these banks. RuPay debit card is provided by these banks.

Five small finance banks have started operations so far..

  1.  Ujjivan Small Finance Bank – Ujjivan started as a microfinance institution. Ujjivan now has 3.5 million customers. Ujjivan is the largest small finance bank out of the five entities which have started operations so far.

Ujjivan Small Finance Bank

2. Equitas Small Finance Bank

In February 2017, Equitas small finance bank has obtained the status of scheduled commercial bank.

Equitas Small Finance Bank

3. Utkarsh Small Finance Bank

Utkarsh Small Finance Bank

4. Suryoday Small Finance Bank

Suryoday Small Finance Bank5. Capital Small Finance Bank


In September 2015 RBI approved ‘in-principle’ license to 10 applicants for setting up  small finance bank. RBI received 72 applications for the same. So far 5 small finance banks have commenced operations. Foreign stake in banks in allowed upto 49%. Many people save money in informal sector like chit funds because they do not have access to formal banking. Small finance banks want to bring these people to formal banking through small finance banks.

These banks can also provides services in vehicle finance, housing loans for micro finance borrowers. These banks will also  provide facility of doorstep banking through business correspondents(BC) because most of the borrowers work in informal sector on daily wage basis.

Small finance banks has to maintain Cash Reserve Ratio(CRR) and Statutory Liquidity Ratio(SLR). Other applicants which have been grants lincense are AU Financiers, Disha Microfin, ESAF Microfinance and Investments, Janlaxmi Financial Services, RGVN Microfinance. These are also expected to commence operation soon.

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