Small Finance Banks (SFBs) are a type of bank in India that were set up with the objective of promoting financial inclusion by providing banking and financial services to the unbanked and underserved sections of the population, including small businesses, low-income households, farmers, and micro-entrepreneurs.
SFBs are regulated by the Reserve Bank of India (RBI) and are required to comply with the same regulatory norms as other commercial banks, including maintaining a minimum capital adequacy ratio, following prudential norms for asset classification and provisioning, and adhering to Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines.
popular Small Finance Banks in India:
• AU Small Finance Bank,
• Ujjivan Small Finance Bank,
• Equitas Small Finance Bank,
• Fincare Small Finance Bank,
• Jana Small Finance Bank,
• ESAF Small Finance Bank.
key features of Small Finance Banks in India include:
• Priority sector lending: SFBs are mandated to lend at least 75% of their total advances to priority sectors such as agriculture, micro and small enterprises, and low-income households.
• Interest rates: SFBs typically offer higher interest rates on savings and fixed deposit accounts compared to commercial banks.
• Microfinance: SFBs are allowed to provide microfinance services, including micro-credit and micro-insurance, to low-income households and micro-entrepreneurs.
• Digital banking: SFBs are required to offer digital banking services, including mobile banking and internet banking, to their customers.
Main benefits of Small Finance Banks:
Financial inclusion:
SFBs are set up with the objective of promoting financial inclusion by providing banking and financial services to people in rural and remote areas, small businesses, low-income households, farmers, and micro-entrepreneurs who may not have access to formal banking services.
Higher interest rates:
SFBs typically offer higher interest rates on savings and fixed deposit accounts compared to commercial banks, which can help customers earn more on their savings.
Priority sector lending:
SFBs are mandated to lend at least 75% of their total advances to priority sectors such as agriculture, micro and small enterprises, and low-income households, which can help in promoting economic development and growth in these sectors.
Microfinance:
SFBs are allowed to provide microfinance services, including micro-credit and micro-insurance, to low-income households and micro-entrepreneurs, which can help in improving their livelihoods and promoting financial inclusion.
Digital banking:
SFBs are required to offer digital banking services, including mobile banking and internet banking, to their customers, which can help in providing convenient and easy access to banking services.
Overall, , which can help in promoting economic development and growth in the country.
