Small Finance Bank in India
Small Finance Banks (SFBs) are a new category of banks introduced by the Reserve Bank of India (RBI) in 2015. These banks aim to provide financial inclusion and support to the unbanked and underbanked sections of society such as low-income households, small businesses, farmers, and micro-enterprises.
SFBs are specialized banks that primarily serve the unserved and underserved segments of the population. They offer basic banking services such as savings and current accounts, fixed deposits, remittance services, and loans. SFBs can also provide payment and settlement services, issuance of debit cards, ATM cards, and other prepaid payment instruments.
To be eligible for a Small Finance Bank license, an entity must have a minimum capital of Rs. 200 crore and should be able to demonstrate its ability to serve the targeted customer segments. The RBI has also mandated that at least 50% of the loans given out by SFBs should be loans of up to Rs. 25 lakh.
Small Finance Banks are subject to the same regulatory framework as other banks in India, and they need to comply with the RBI’s guidelines on capital adequacy, asset classification, and provisioning norms. SFBs are also required to maintain a priority sector lending target of 75% of their total advances.
Overall, Small Finance Banks are an important development in India’s banking sector, as they aim to promote financial inclusion and reach out to the underserved sections of the population.
