Small Finance Banks are new types of banks licensed by the RBI to promote basic banking services like deposits and lending to unserved/underserved sections. They must adhere to prudential norms like commercial banks and at least 75% of their credit must go to priority sectors. Initially, 50% of their loan portfolio must be for amounts up to Rs. 25 lakh and over time they can apply to become universal banks if they perform satisfactorily. Payment banks will complement traditional banks by ensuring cheaper services and pushing for more efficient payment channels.

1. Small Finance Bank
By: Harveer Singh
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2. Small Finance Banks
• New Small bank licences are issued by the RBI.
• Small finance banks will offer basic banking
services, accepting deposits and lending to
unserved and underserved sections including
small business units, small and marginal farmers,
micro and small industries, and entities in the
unorganized sector.
• Small finance banks will be subject to most of the
prudential norms that scheduled commercial
banks have to adhere to.

3. • The minimum paid-up equity capital for small
finance banks was set at Rs.100 crore and the
minimum initial contribution from promoters
fixed at 40%

4. • Seventy-five percent of the credit advanced by
small finance banks will need to go to sectors
that are considered part of the so-called
priority sector.
• Small finance banks will also have to ensure
that 50% of their loan portfolio constitutes
advances of up to Rs.25 lakh,

5. • Such banks can eventually apply to RBI to
transit into universal banks once they have
established a satisfactory track record. Such a
transition would be subject to due diligence
by the banking regulator changing the banking
landscape in the country.

6. • Payment banks will complement the
traditional banking sector rather than
compete with it, but they will also ensure
costs of these services come down and push
universal banks to use more efficient and
cheaper payment channels.
• Efficiency, Innovation and Inclusion.

7. Thank You.
• For any
feedback/query/word of
thanks, the Tutor can be
contacted at
harveersinh@gmail.com