Small Financial Banks

Financial inclusion is the provision of financial services to underprivileged and low-income groups in society at a reasonable cost, as reflected in the financial exclusion, which occurs when those services are either unavailable or unaffordable. The primary goal of financial inclusion is to make banking services accessible to the entire population without discrimination because they are essentially a public good.

The Reserve Bank of India has a goal for 2020 that included opening approximately 600 million new customer accounts and providing them with a range of services by utilising IT. The RBI published criteria for small financial bank licencing on November 27, 2014, and on February 4, 2015, it issued licences to 10 applications to establish small financial banks, the majority of which are microfinance and small financing enterprises.

The small financial banks are those that will largely carry out fundamental banking services, such as accepting deposits and lending to unserved and undeserving groups, such as unorganised sector entities, small business units, small and marginal farmers, and micro- and small businesses. Simply put, small financial banks enable those who lack access to the traditional banking system to use banking services.

In 2015, The Reserve Bank of India (RBI) ten entities were given provisional licenses which allowed them to convert into small finance banks within one year. As of 2022, there are 12 small finance banks in India as follows:

 

No.	Original licensee/promoter	Commenced	Bank name	Headquarters
1	Ujjivan Financial Services Pvt Ltd	1 February 2017	Ujjivan Small Finance Bank	Bangalore
2	Janalakshmi Financial Services Pvt Ltd	29 March 2018	Jana Small Finance Bank	Bangalore
3	Equitas Holdings Pvt Ltd	5 September 2016	Equitas Small Finance Bank	Chennai
4	Au Financiers India Ltd	19 April 2017	AU Small Finance Bank	Jaipur
5	Capital Local Area Bank Ltd	24 April 2016	Capital Small Finance Bank	Jalandhar
6	Disha Microfin Pvt Ltd	21 July 2017	Fincare Small Finance Bank	Bangalore
7	ESAF Microfinance	17 March 2017	ESAF Small Finance Bank	Thrissur
8	RGVN North East Microfinance Ltd	17 October 2017	North East Small Finance Bank	Guwahati
9	Suryoday Microfinance Pvt Ltd	23 January 2017	Suryoday Small Finance Bank	Navi Mumbai
10	Utkarsh Microfinance Pvt Ltd	23 January 2017	Utkarsh Small Finance Bank	Varanasi
11	Shivalik Mercantile Co-operative Bank Ltd	26 April 2021	Shivalik Small Finance Bank	Noida
12	Centrum Financial Services Limited and BharatPe	1 November, 2021	Unity Small Finance Bank	Delhi

 

They are capable of:

 

1.      Make loans after receiving a minimal investment.

2.      Distribute insurance policies, mutual funds, and other basic third-party financial goods.

3.      Lend the priority sector 75% of their total adjusted net bank credit.

4.      For a single borrower, the maximum loan amount would be 10% of capital funds, and for a group, 15%.

5.      At least 50% of loans must not exceed Rs. 25 lakhs.

 

They are incapable of:

1.      Big corporations and groups are not eligible for loans.

2.      For the first five years, it cannot open branches without prior RBI approval.

3.      The promoter's other financial activities must remain separate from the bank.

4.      It is not permitted to create subsidiaries to conduct non-banking financial services operations.

5.      It can't be a bank's commercial correspondent.

MMs. Mini. V. K,  Assistant Professor of Commerce, Al Shifa College of Arts and Science, Keezhattoor, Perinthalmanna