List of Small Finance Banks in India

Academy   Last Update - 2023-09-14

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-

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​

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