Small Finance Bank-SFB

  • Small Finance Banks are those financial institutions that provide financial services to the areas of the country where banking services are not available.
  • SFBs have been established to facilitate financial inclusion to small business units, small and marginal farmers, micro and small scale industries and entities in the unorganized sector.
  • The establishment of a small finance bank was recommended by the Nachiket Mor committee.
  • Small Finance Bank is registered as a Public Limited Company under the Companies Act, 2013.
  • Small finance banks cannot borrow funds from the Reserve Bank of India unlike any other scheduled bank.
  • It is a smaller and limited version of commercial banks that can take deposits and give loans.
  • The minimum capital for setting up an SFB should be Rs 100 crore.
  • It can sell other products such as insurance, mutual funds etc. and take the size of a full-fledged commercial bank.
  • There are 10 small finance institutions operating in India.
  • Capital Small Finance Bank was the first bank which started its operations on 24 April 2016 with 47 branches.

Objective of Small Finance Bank-SFB

Bringing non-banking institutions under the ambit of the banking system.
Ensuring availability of banking facilities in non-banking areas.
To ensure access to banking products to the unbanked people in the country.
To provide banking services to small and marginal farmers, micro and small scale industries and other organized sector institutions etc.

Limits of Small Finance Bank-SFB

They cannot give loans to large companies and groups.
Cannot open branches before the approval of the Reserve Bank of India for the first five years.
They cannot have business contacts with any other bank.
They cannot set up subsidiaries for non-banking financial services activities.