Context:
Crisil Ratings projects that advances of Small Finance Banks (SFBs) will exceed ₹2 trillion in FY26, marking a 16–17% year-on-year growth, up from 13% in FY25. The growth is driven by non-microfinance segments and a gradual recovery in microfinance loans.
Small Finance Banks (SFBs)
Purpose
- Promote financial inclusion and expand banking to underserved sections:
- Small businesses, micro-enterprises, marginal farmers, low-income households.
- Complement mainstream banks by providing niche credit.
Regulatory Framework
- Regulator: Reserve Bank of India (RBI)
- License: On-tap licensing under RBI guidelines
- Minimum Capital: ₹200 crore
- Compliance: CRAR, liquidity ratios, priority sector lending norms
Functions
- Deposits: Savings, current, term deposits
- Loans & Advances:
- Microfinance (priority sector)
- Small business loans, housing loans, vehicle loans
- Retail and commercial loans
- Payments & Remittances: Digital banking, UPI-enabled services
Key Features
- Priority Sector Lending: ≥75% of adjusted net bank credit
- Deposit Limit: ₹2 lakh per individual
- Focus Areas: Microfinance, small business loans, rural banking
- Digital Adoption: Strong use of UPI and mobile banking
