Introduction
The physical banks that aim to provide basic banking products like deposits and supply of credit within a limited area of operation are known as Small Finance banks.
- Small Finance Banks are expected to meet the credit and the remittance needs of the small businesses, farmers, micro and small industries, low-income households, migrant workers, and unorganized sector.
- The operations of these banks are based on high-end technology which is also low cost.
Note: India’s first Small Finance Bank was Capital Lab Small Finance Bank. In September 2016, it got its approval along with nine other entities, Capital Lab Small Finance Bank began operations in April 2016.
Features
- Small Finance Banks can accept deposits like commercial banks. These deposits include savings, current, fixed deposits, and recurring deposits.
- They are different from Payments Banks as they can also lend money.
- For the initial three years, the banks would require prior approval for the expansion.
- The area of operation is restricted for Small Finance Banks as they are known to be the local banks.
- Any individual with ten years of experience in banking can apply for a license of Non-Banking Financial Corporations (NBFCs). 1. NBFCs target only small businesses and MSMEs. 2. NBFCs are not allowed to lend their deposits to big businesses or industries.
Establishment
Setting up of a Small Finance Bank is subjected to some of the following conditions. These are:
- The fundamental requirement for Small Finance Banks is that it must have 25% of its branches in the unbanked areas.
- They shall require a minimum paid-up equity capital requirement of INR 100 crore.
- Their name must consist of ‘Small Finance Bank'.
- It is not possible for them to undertake non-banking financial service activities.
- According to the RBI, Small Finance Banks must categorize 75% of its Adjusted Net Bank Credit (ANBC) to the priority sector.
- Minimum loan size cannot exceed: 1. 10% of the total capital funds in case of a single person, 2. 15% of the total capital funds in case of a group.
- Out of the total loans and advances, these banks should have at least 50% of its loans up to a value of INR 25 lakhs.
- It is only with prior approval from the RBI; Small Finance Banks can undertake financial services like distribution of mutual funds, pension products, insurance products, and so on. Example: Capital Local Area Bank was the largest local area bank in the country. It was only after 16 years of excellent performance in all spheres, and the RBI converted it to a ‘Small Finance Bank.
- Only after the approval of the RBI, a Small Finance Bank can be transformed into a full-fledged bank.
List
| Name | Headquarters | Key People | Tagline |
|---|---|---|---|
| Capital Lab Small Finance Bank | Jalandhar, Punjab | Mr. Sarvjit Singh Samrat (MD) | ‘Viswas se Vikas tak’ |
| Au Small Finance Bank Limited (AUBANK) | Jaipur, Rajasthan | Mr. Sanjay Agarwal (CEO & MD) | ‘Chalo Age Badhe’ |
| Equitas Small Finance Bank | Chennai, Tamil Nadu | Mr. PN Vasudevan (CEO & MD) | 'Its Fun Banking’ |
| FINCARE Small Finance Bank | Bengaluru, Karnataka | Mr. Rajeev Yadav (CEO & MD) | ‘A New Era in SamrtbankingBegins’ |
| ESAF Small Finance Bank | Thrissur, Kerela | Mr. K. Paul Thomas (CEO & MD) Mr. Raveendrathan Prabha (Chairman) | ‘Joy of Banking’ |
| Janalakshmi Small Finance Bank | Bengaluru, Karnataka | Mr. Ramesh Ramanathan (Chairman) Mr. Ajay Kanwal (CEO) | ‘Likho Apni Kahaani’ |
| Suryoday Small Finance Bank | Navi Mumbai | Mr. R Baskar Babu (CEO & MD) | ‘A bank of Smiles’ |
| North East Small Finance Bank (NESFB)- RGVN Micro Finance Ltd | Guwahati, Assam | Deep Chandra Joshi (Chairman) Ms. Rupali Kalita (MD) | ‘Your Door Step Banker’ |
| Utkarsh Small Finance Bank | Varanasi, U.P | Mr. Govind Singh (CEO & MD) | ‘Aapki Umeed Ka Khata’ |
| Ujjivan Small Finance Bank | Bengaluru, Karnataka | Mr. Sunil Patel (Chairman) Mr. Samit Ghosh (CEO & MD) | ‘We Believe in Your Belief’ |