With a need of financial inclusion in the country, RBI and central government has taken many steps at different times. Taking a further step, RBI gave differentiated licenses for specific activities to new set of banks named Payment Banks and Small Banks.
With their coming, customers will have a variety of choices.
What is a Small Finance Bank?
Small 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 credit and remittance needs of small businesses, farmers, micro and small industries, unorganised sector ,low income households and migrant work force through high technology-low cost operations.
With their coming, customers will have a variety of choices.
What is a Small Finance Bank?
Small 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 credit and remittance needs of small businesses, farmers, micro and small industries, unorganised sector ,low income households and migrant work force through high technology-low cost operations.
| Name of the Small Financial bank | Head quarters | Key People | Tagline | Points to remember |
|---|---|---|---|---|
| Au Small Finance Bank Limited(AUBANK) | Jaipur, Rajasthan | Mr. Sanjay Agarwal(CEO & MD) | ‘Chalo Aage Badhe’ | It was initially started as a vehicle finance company in 1996 and was then changed to SFB in 2017 |
| Capital Lab Small Finance Bank | Jalandar ,Punjab | Sarvjit Singh Samra( MD) | Viswas se Vikas tak’ | It is India’s first small finance bank |
| Equitas Small Finance Bank | Chennai, TamilNadu | PN Vasudevan(CEO & MD) | Its Fun Banking’ | It was initially started as a microfinance lender, in 2007 and became SFB in 2017 |
| ESAF Small Finance Bank | Thrissur , Kerala | K. Paul Thomas(CEO & MD) ,Raveendranathan Prabha(Chairman) | Joy of Banking’ | |
| FINCARE Small Finance Bank Limited(formed from Disha Microfin Limited) | Bengaluru , Karnataka | Rajeev Yadav(CEO & MD) | ‘a new era in smartbanking begins’ | |
| Janalakshmi Small Finance Bank | Bengaluru , Karnataka | Ramesh Ramanathan(Chairman) , Ajay Kanwal (CEO) | Likho Apni Kahaani | |
| North East Small Finance Bank(NESFB)-RGVN Micro Finance Ltd. | Guwahati , Assam | DEEP CHANDRA JOSHI( chairman) ,Rupali Kalita (MD ) | Your Door step Banker’ | |
| Suryoday Small Finance Bank | Navi Mumbai | Mr. R Baskar Babu(CEO & MD) | A bank of smiles | |
| Ujjivan Small Finance Bank | Bengaluru, Karnataka | Sunil Patel(chairman) , Samit Ghosh (CEO & MD) | We believe in your belief | |
| Utkarsh Small Finance Bank | Varanasi , U.P | Govind Singh(CEO & MD) | Aapki Umeed Ka Khata’ |
They can accept any deposit (savings, current, fixed deposits, recurring deposits) like commercial banks.
Important features of Small 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 local bank, their area of operation will be restricted.
- NBFC’s , 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.
- Minimum paid-up equity capital requirement of Rs 200 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; 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 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’s approval.
- A fundamental requirement is that it must have 25% of its branches set up in unbanked areas.
