What is a Small Finance Bank?

Small Finance banks are physical banks whose aim is to provide basic banking products such as deposits and supply of credit but in a limited area of operation. Small banks are expected to meet the credit and remittance needs of small businesses, farmers, micro and small industries, unorganised sector, low-income households and the migrant workforce through high technology cost operations.

List of small finance banks in India-

Name of the Small Financial bank

Headquarters

Tagline

Au Small Finance Bank Limited(AUBANK)

Jaipur, Rajasthan

 Chalo Aage Badhe

Capital Lab Small Finance Bank

Jalandhar, Punjab

Viswas se Vikas take

Equitas Small Finance Bank

Chennai, Tamilnadu

It is Fun Banking

ESAF Small Finance Bank

Thrissur, Kerala

Joy of Banking

FINCARE Small Finance Bank Limited(formed from Disha Microfin Limited)

Bengaluru, Karnataka

a new era in smartbanking begins

Janalakshmi Small Finance Bank

Bengaluru, Karnataka

Likho Apni Kahaani

North East Small Finance Bank (NESFB) - RGVN Micro Finance Ltd.

Guwahati, Assam

Your Doorstep Banker

Suryoday Small Finance Bank

Navi Mumbai

A bank of smiles

Ujjivan Small Finance Bank

Bengaluru, Karnataka

We believe in your belief

Utkarsh Small Finance Bank

Varanasi, U.P

Aapki Umeed Ka Khata

Important features of Small Banks:

  • They can accept any deposit (savings, current, fixed deposits, recurring deposits) like commercial banks.
  • Unlike payment banks, small finance banks will be allowed to lend money also.
  • For the initial 3 years, prior approval will be required for branch expansion.
  • To give the feel of a local bank, their area of operation will be restricted.
  • NBFCs, any individual with 10 years of experience in banking can apply for licenses.
  • Their target are small businesses and MSMEs.
  • They are not allowed to lend the deposited money to big businesses or industries.

Some of the conditions for setting up a Small Bank:

  • Minimum paid-up equity capital requirement of Rs 100 crore.
  • Every small finance bank must have the words small finance bank in its name.
  • They cannot set up subsidiaries to undertake non-banking financial service activities.
  • 75% of its Adjusted Net Bank Credit (ANBC) should be advanced to the priority sector as categorized by RBI.
  • Maximum loan size to a single person cannot exceed 10% of total capital funds; and cannot exceed 15% in the case of a group.
  • At least 50% of its loans should constitute loans and advances of up to 25 lakh.
  • Small banks can undertake financial services like the distribution of mutual fund units, insurance products, pension products, and so on, but not without prior approval from the RBI.
  • A small bank can transform into a full-fledged bank, but only after RBI approval.
  • A fundamental requirement is that it must have 25% of its branches set up in unbanked areas.
  • ​List of Banks in India​