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What is Small Finance Bank?

Small Finance Bank is formed by Reserve Bank of India under the guidance of Government of India with an objective to provide financial services to the unserved and unbanked region of the country. In summary, the small finance bank shall primarily undertake basic banking activities of acceptance of deposits and lending to unserved and underserved sections.

The objectives of setting up of small finance banks will be to further financial inclusion by (i) provision of savings vehicles, and (ii) supply of credit to small business units, small and marginal farmers, micro and small industries, and other unorganized sector entities, through high technology low-cost operations.

Generally, the Small Finance Bank shall be registered as a public limited company under the Companies Act, 2013. Also, The Reserve Bank of India issue licence to the bank under Section 22 (1) of the Banking Regulation Act, 1949 to carry on the business of small finance bank in India.

List of Scheduled Small Finance Banks

Key Points

  • The small finance bank shall primarily undertake basic banking activities of acceptance of deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and also unorganized sector entities.
  • Further, there will not be any restriction in the area of operations of small finance banks.
  • Firstly, the minimum paid-up voting equity capital for small finance banks shall be Rs.200 crore.
  • Initially, Small finance banks which are converted from UCBs, the minimum net worth of such small finance banks shall be Rs.100 crore from the date of commencement of business. However, they will have to increase their minimum net worth to Rs.200 crore within five years from the date of commencement of business.
  • Further, The small finance bank will be subject to all prudential norms and regulations of RBI as applicable to existing commercial banks including requirement of maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). No forbearance would be provided for complying with the statutory provisions.
  • Also The small finance banks will be required to extend 75 per cent of its Adjusted Net Bank Credit (ANBC) to the sectors eligible for classification as priority sector lending (PSL) by the Reserve Bank.
  • At least 50 per cent of its loan portfolio should constitute loans and advances of upto Rs. 25 lakhs.
  • The promoter’s minimum initial contribution to the paid-up equity capital of such small finance bank shall at least be 40 per cent and gradually brought down to 26 per cent within 12 years from the date of commencement of business of the bank.
  • The foreign shareholding in the small finance bank would be as per the Foreign Direct Investment (FDI) policy for private sector banks as amended from time to time.
  • Generally, as a rule, Small Finance Banks are governed by the provisions of the Banking Regulation Act, 1949, Reserve Bank of India Act, 1934, Foreign Exchange Management Act, 1999, Payment and Settlement Systems Act, 2007, Credit Information Companies (Regulation) Act, 2005, Deposit Insurance and Credit Guarantee Corporation Act, 1961.

What is Scheduled Small Finance Bank?

The small finance banks will be given scheduled bank status once they commence their operations, and found suitable as per Section 42 (6) (a) of the Reserve Bank of India Act, 1934.

List of Scheduled Small Finance Banks in India

Earlier, there are only 10 Small finance banks functioning in India. Further, RBI has granted banking license to Shivalik Small Finance Bank Limited on January 1, 2021. Since it is commenced business on April 26, 2021, total number of small finance banks in India becomes 11. The following are the list of Scheduled small finance bank in India and their official websites

S.NoName of the BankWebsites
1Au Small Finance Bank Limitedwww.aubank.in
2Capital Small Finance Bank Limitedwww.capitalbank.co.in
3Equitas Small Finance Bank Limitedwww.equitasbank.com
4Suryoday Small Finance Bank Limitedwww.suryodaybank.com
5Ujjivan Small Finance Bank Limitedwww.ujjivansfb.in
6Utkarsh Small Finance Bank Limitedwww.utkarsh.bank
7ESAF Small Finance Bank Limitedwww.esafbank.com
8Fincare Small Finance Bank Limitedwww.fincarebank.com
9Jana Small Finance Bank Limitedwww.janabank.com
10North East Small Finance Bank Limitednesfb.com
11Shivalik Small Finance Bank Limitedwww.shivalikbank.com

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