There is no doubt that India is currently one of the strongest economies in the world, weathering global uncertainties and showing good growth. But this prosperity is yet to reach all the citizens, with almost 190 million people being unbanked in India, and almost 160 million people being either credit underserved or unserved. This, if viewed with optimism, is a huge opportunity that can catapult India to becoming a developed nation quickly.
It is this very opportunity that has caught the eye of policymakers and entrepreneurs, and the result has been a growing fintech industry, as well as the rise of small finance banks that are aimed to ensure financial inclusivity for all. While a lot is known about the state of fintech innovations in India, small finance banks have been under the radar despite doing some amazing work to empower the underserved citizens in India. In this article, let’s learn more about Small Finance Banks and look at the top 11 small finance banks currently operating across various locations in India.
What are Small Finance Banks?
Small finance banks primarily serve rural areas and other parts of society that are often overlooked by urban banks. These banks are instrumental in supporting farmers and small business owners, offering essential banking services such as deposits and withdrawals, much like the urban banks.
Registered as public limited companies under the Companies Act of 2013, small finance banks are significant for promoting financial inclusion in underdeveloped areas. They provide savings options and other financial services to underserved or unserved communities, ensuring that even the most marginalized sections of society have access to banking.
Additionally, small finance banks are vital in financing small business units in rural areas, helping to boost local economies and support entrepreneurship at the grassroots level.
Top 11 Small Finance Banks in India – 2024
1. Unity Small Finance Bank – The Newcomer with Big Ambitions
Headquartered: New Delhi
Founded: 2021
Unity Small Finance Bank Limited, a collaboration between Centrum Financial Services Limited and BharatPe, was publicly incorporated on August 25, 2021. Registered with the Registrar of Companies in Delhi, Unity Bank boasts an authorised share capital of ₹ 40,000,000,000 and a paid-up capital of ₹ 7,049,019,600. Engaged in various financial intermediation activities, Unity Bank is headquartered at Basant Lok, Vasant Vihar, New Delhi.
Though a relatively new player, Unity Small Finance Bank is poised to make significant strides in the financial sector, leveraging its substantial capital base and strategic partnerships. The goal of Unity Small Finance Bank is to become the first fully digital bank in India. Unity Bank aims to provide cutting-edge solutions that make banking easier, more secure, and more convenient for everyone, all supported by best-in-class technology.
2. Equitas Small Finance Bank – The Original Harbingers
Headquartered: Chennai
Founded: 2016
Equitas Small Finance Bank, one of the first to receive an SFB license, has rapidly scaled its presence across microfinance, vehicle finance, housing loans, MSME funding, and corporate lending. Equitas uses innovative practices to lend to underserved segments like private transport owners, microentrepreneurs, and rural homebuyers.
3. AU Small Finance Bank – The Pedigreed Professionals
Headquartered: Jaipur
Founded: 1996 (as a non-banking finance company)
AU Small Finance Bank, with over two decades of operational experience, started as a non-banking finance company extending vehicle loans to Rajasthan’s frontier towns and villages. AU pioneered product lines like used car loans, housing finance for the underserved, and funding for small road transport operators.
AU Small Finance Bank actively centers on vernacular retail categories such as auto loans, affordable housing credit, and MSME finance, offering a unique combination of small-town relationship banking and institutional trust.
4. Shivalik Small Finance Bank – The Tech-Savvy Pioneer
Headquartered: Uttar Pradesh
Founded: 1998 (as Shivalik Mercantile Co-operative Bank)
Shivalik Small Finance Bank transformed from Shivalik Mercantile Co-operative Bank into India’s first Small Finance Bank. Founded in 1998, the bank transitioned under Mr Suveer Kumar Gupta’s leadership, who now serves as an Advisor to the Board.
With over 25 years of experience in retail banking, Shivalik Bank focuses on technology and consumer-centricity, leveraging Infosys Finacle for core and digital banking solutions. Its cloud architecture enables scalable, cost-effective growth and full availability on retail payment platforms as a member of the National Financial Switch. Shivalik Bank continues to innovate and expand, setting a high standard for other small finance banks in India.
5. Ujjivan Small Finance Bank – The Everyman’s Bank
Headquartered: Bengaluru
Founded: 2017
Ujjivan lives up to its name, which means “livelihood” in Sanskrit, by bringing essential banking services to the masses. From micro-loans for entrepreneurs to simple savings accounts, Ujjivan offers full-family banking solutions that are accessible and affordable.
The bank’s core micro-banking vertical extends both group and individual loans along with remittances, insurance, and other financial services. On the tech front, partnerships with Airtel Payments Bank and PayNearby enable seamless cash transactions through an assisted model.
For rural customers, products like the Kisan Pragati card provide crop loans and other agricultural finance through farmer collectives. The bank’s “Money Mitras” service face-to-face banking needs in underserved areas.
6. Suryoday Small Finance Bank – The Friendly Neighborhood Bank
Headquartered: Mumbai
Founded: 2008 (as a micro-finance institution)
Suryoday Small Finance Bank, meaning “sunrise,” aims to provide a personal touch, extending sustainable credit to underbanked segments across India. Starting as a micro-finance outfit, Suryoday has grown to offer financial services tailored to individual needs.
The bank’s inclusive finance vertical provides loans to joint liability groups, affordable housing finance, secured business loans, and micro-enterprise finance. Suryoday also offers products for MSMEs, home loans, and wholesale clients.
True to its name, Suryoday aims to rise as a supportive partner, committed to sharing both good and bad times with its customers.
7. North East Small Finance Bank – The Frontier Force
Headquartered: Assam
Founded: 2016
Originally the northeast wing of L&T Finance, North East Small Finance Bank (NESFB) is dedicated to extending credit to businesses, farmers, and rural entrepreneurs in some of India’s most remote regions. From Nagaland to Meghalaya, whether you’re looking to grow turmeric, finance a piggery operation, or need quick cash for development, NESFB is your go-to institution.
The bank offers a variety of asset products, including business loans ranging from ₹ 5 to ₹ 25 lakh, personal loans for salaried individuals, and innovative credits like loans against future rent receivables or for upskilling purposes. NESFB is committed to providing tailor-made financial inclusion for the industrious people of the North East.
8. Capital Small Finance Bank – The Neighborhood Champions
Headquartered: Jalandhar
Founded: 2000
Capital Small Finance Bank transformed from a local area bank to India’s first small finance bank in 2016. It built trust by delivering basic banking services to communities often ignored by bigger players.
Post-transition, Capital has scaled its grassroots connection by focusing on institutional lending to small borrowers in agriculture, retail, and MSME segments. The iconic Kisan Credit Card with crop loan facilities remains a flagship product, along with working capital and project finance for village-level entrepreneurs and small businesses.
9. Jana Small Finance Bank – The Inclusive Disruptors
Headquartered: Bengaluru
Founded: 2008 (as Bharatha Swamukti Samsthe)
Jana Small Finance Bank, formerly Bharatha Swamukti Samsthe, embraces the underbanked as a target segment. As a fully-fledged small finance bank, it boasts a geographically diverse portfolio of loans and branches across India.
Jana democratizes customer-centricity by offering financial instruments in multiple regional languages and imparting financial literacy to the masses.
10. ESAF Small Finance Bank – The Green Changemakers
Headquartered: Kerala
Founded: 1995 (as a non-profit)
ESAF Small Finance Bank, standing for “Evangelical Social Action Forum,” began as a non-profit extending micro-enterprise development initiatives. Today, it is a full-fledged small finance bank with a focus on environmental and social impact.
The bank’s ESG policy framework promotes financial inclusion, environmental protection, accountability, and sustainable growth. ESAF offers micro-loans for women entrepreneurs, farm financing for eco-friendly agricultural practices, and more.
11. Utkarsh Small Finance Bank – The Grassroots Growth Drivers
Headquartered: Varanasi
Founded: 2017
Utkarsh Small Finance Bank focuses on sustainability and grassroots connections, expanding financial services across northern and central India. As the first SFB headquartered in the PM’s constituency of Varanasi, it has strong regional goodwill and an understanding of what works in these geographies.
Utkarsh offers a wide range of asset products, from micro banking group loans and affordable home finance to wholesale lending for larger investments. The bank is dedicated to catalyzing sustainable entrepreneurship and asset creation across the underbanked economic pyramid.
How are Small Finance Banks different from Regular and Payment Banks?
While small financing banks target unorganized labour, small company owners, small farmers, and micro, small, and medium-sized firms, commercial banks are not restricted in who they may serve.
Another distinction between small financing banks and commercial banks is that the former are allowed to open branches anywhere, while the latter are required to open 25% of their branches in rural regions within the first three years. While loans are offered by both kinds of banks, small financing banks are required to provide 75% of their loans to the priority sector.
Conclusion
With the help of small finance banks, India’s problem of financial inclusion has been greatly reduced since banking services are now available in rural and impoverished areas of the nation. Additionally, small finance banks have given these underprivileged people easier access to savings, investment opportunities, and loans.
Small Finance Banks are expected to play an even bigger role in the future of banking in India thanks to their innovative product offerings and customer-centric approach, giving millions of individuals simple access to banking solutions nationwide.
FAQs
1. Which Small Finance Bank is giving the highest FD rates?
Within the scheduled small finance bank category, Unity Small Finance Bank has the highest FD interest rate of 9.00% per annum, followed by Suryoday Small Finance Bank, which offers FD rates of 8.65% per annum. Among designated private sector banks, SBM Bank has the best FD interest rates of up to 8.25% per annum.
2. Who Can Promote an SFB in India?
The main promoters eligible to set up Small Finance Banks (SFBs) in India include resident individuals or professionals with over ten years of banking experience, private companies or societies with a proven 5-year track record, and existing financial entities like microfinance institutions or local area banks.
3. What Is the Minimum Capital Requirement for SFBs?
Promoters of SFBs must maintain a minimum paid-up capital of ₹ 200 crore, with at least ₹ 100 crore as initial capital. Additionally, promoters must invest at least 40% of the paid-up capital.
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4. Can SFBs Lend and Accept Deposits Like Normal Banks?
Yes, Small Finance Banks are allowed to perform most basic banking activities, such as accepting deposits and extending loans. However, they face certain restrictions, including a cap on the maximum loan size and a prohibition on participating in private or investment banking activities.
