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Small finance banks in India — the cohort, the mandates and the framework

Q: How are SFBs different from universal banks?

SFBs face two defining mandates a universal bank does not. They must direct 75% of Adjusted Net Bank Credit to priority sectors (versus 40% for universal banks), and at least 50% of their loan portfolio must be loans up to Rs 25 lakh, keeping the focus on small borrowers. They also carry a higher minimum capital-adequacy ratio (15%). In exchange they get a full banking licence rather than the narrower licence of, say, a payments bank. These figures are rounded and approximate and set by the RBI.

IndicativeFigures on this page are indicative and pending expert verification by Vikram Jain (CA) — not yet admitted to the BankPulse Verified-numbers ledger.

Quick answerSmall Finance Banks (SFBs) are a differentiated class of bank the RBI created under its 2014 licensing guidelines to deepen financial inclusion. About eleven operate today, most converted from NBFC-microfinance institutions. They do full-service banking but live by two rules a universal bank does not: 75% of Adjusted Net Bank Credit must go to priority sectors (versus 40%), and at least 50% of the loan book must be loans up to Rs 25 lakh. The largest, AU Small Finance Bank, has applied to become a full universal bank. Figures are official, rounded and approximate.

The chart shows the number of operational small finance banks since the first one opened in 2016. The table below carries the same figures so the page is readable without JavaScript — for accessibility and AI answer engines.

Number of operational small finance banks, by year

Year	SFBs (approx.)	Note
2016	~1	Capital Small Finance Bank, converted from a local area bank, is the first SFB to begin operations
2017	~10	The original cohort of ten in-principle licensees (most former NBFC-MFIs) is operational
2021	~12	Shivalik (first urban co-operative bank to voluntarily transition) and Unity (a fresh licence) join
2025	~11	After consolidation — Fincare merged into AU, and slice combined with North East SFB

All figures are rounded and approximate; intermediate-year counts are indicative and reflect new licences, voluntary transitions and consolidation. None of these figures is in the BankPulse Verified-numbers ledger pending reviewer sign-off. For exact figures see the source linked below.

The small-finance-bank cohort and where they came from

The defining fact about the sector is its origin: most SFBs are former NBFC-microfinance institutions that converted to banks, bringing their small-borrower lending DNA with them. One came from a local area bank, one from an urban co-operative bank, and a couple are fresh licences.

Bank	Origin	Note
AU Small Finance Bank	NBFC (Au Financiers)	The largest SFB by assets; has applied to the RBI to transition to a universal bank; absorbed Fincare SFB in 2024
Equitas Small Finance Bank	NBFC / microfinance	Chennai-based; listed; reverse-merged with its holding company
Ujjivan Small Finance Bank	NBFC-MFI (Ujjivan Financial)	Listed; reverse-merged with its holding company
Jana Small Finance Bank	NBFC-MFI (Janalakshmi)	Listed in 2024
ESAF Small Finance Bank	NBFC-MFI (Kerala)	Listed in 2023
Utkarsh Small Finance Bank	NBFC-MFI	Listed in 2023
Suryoday Small Finance Bank	NBFC-MFI	Listed
Capital Small Finance Bank	Local area bank	The first SFB to commence operations (2016); listed in 2024
Shivalik Small Finance Bank	Urban co-operative bank	The first UCB to voluntarily transition into an SFB (2021)
Unity Small Finance Bank	Fresh licence (Centrum + BharatPe)	Began in 2021; took over the stressed PMC Bank under a scheme
North East Small Finance Bank	NBFC-MFI (RGVN)	Combined with the fintech 'slice'

The list is indicative and rounded; the cohort changes as banks merge, list or transition. Not in the Verified-numbers ledger pending reviewer sign-off.

What makes an SFB different — the mandates

An SFB has a full banking licence — unlike a payments bank it can lend — but it is held to inclusion-first rules that a universal bank is not.

Mandate	Requirement	Why it exists
Priority-sector lending	75% of Adjusted Net Bank Credit (ANBC)	Far above the 40% asked of universal banks — SFBs exist to push credit to the underserved
Small-ticket focus	At least 50% of the loan book in loans up to Rs 25 lakh	Keeps lending tilted toward small borrowers — small businesses, marginal farmers, micro units
Minimum capital	Rs 200 crore minimum net worth (paid-up voting equity)	An entry-capital floor set in the 2014 licensing guidelines
Capital adequacy	Minimum CRAR of 15% of risk-weighted assets	A higher buffer than the universal-bank minimum, reflecting the riskier small-borrower book
Promoter holding	Minimum 40% initial promoter stake, brought down over time	Skin in the game at the start, dispersed ownership later
Stock-exchange listing	Listing required within three years of reaching Rs 500 crore net worth	Forces transparency and market discipline as the bank grows

SFB vs payments bank vs universal bankAll three are RBI bank licences, but they differ on what they may do. A universal bank does everything and lends 40% to priority sectors. A small finance bank takes deposits and lends, but must put 75% into priority sectors and keep half its book in small loans. A payments bank may take small deposits and move money but cannot lend at all. SFBs sit between the payments bank and the universal bank — a full lender, deliberately tilted toward the small borrower.

Deposit and credit footprint

SFBs are small in balance-sheet terms next to the scheduled commercial banks — collectively a low single-digit percentage of system-wide deposits and credit — but they punch above their weight in the small-ticket, semi-urban and rural segments they were built to serve. Their loan books grew rapidly after conversion, concentrated in microfinance, small-business, vehicle and gold loans, and they typically pay higher deposit rates than larger banks to attract funding. Exact sector deposit and credit totals are routed to the reviewer before any precise figure is published; this page deliberately gives the footprint qualitatively rather than quote an unverified rupee aggregate.

How the SFB framework evolved

Date	Milestone
Nov 2014	RBI issues the Guidelines for Licensing of Small Finance Banks in the Private Sector — a new 'differentiated' bank category aimed at financial inclusion
Sep 2015	RBI grants in-principle approval to ten applicants, most of them existing NBFC-microfinance institutions
2016	Capital Small Finance Bank, converted from a local area bank, is the first SFB to commence operations
2017	The original cohort of ten SFBs is operational, led by AU Small Finance Bank
Dec 2019	RBI moves SFB licensing 'on tap' and opens a voluntary transition path for urban co-operative banks to become SFBs
2021	Shivalik becomes the first UCB to transition into an SFB; Unity SFB (Centrum + BharatPe) begins and takes over the stressed PMC Bank
Apr 2024	RBI lays down the conditions for an SFB to apply to become a universal bank (≥5 years' track record, ≥Rs 1,000 crore net worth, listed, profitable); AU SFB applies

What it means for bankers

Small finance banks are the institutional bridge between the microfinance world and mainstream banking. For a banker the story is one of scaling up while staying small-focused: the 75% priority-sector floor and the 50%-small-ticket rule keep SFBs anchored to inclusion lending even as they chase scale, deposits and a stock-market listing. Watch three things. First, asset quality — their books are weighted toward unsecured microfinance and small-business credit, so they feel stress earlier than universal banks when the small-borrower cycle turns. Second, cost of funds — lacking the deposit franchise of big banks, SFBs pay up for deposits, which pressures margins. Third, the universal-bank transition the RBI opened in April 2024: AU SFB has applied, and a graduation by the strongest SFBs would mark the framework working as intended. Like all bank depositors, SFB customers are covered by the DICGC Rs 5,00,000 guarantee.

More live dataRelated BankPulse pages: Microfinance (MFI) · Priority Sector Lending · Banks by Group · Co-operative Banks · Deposit Insurance (DICGC).

Small finance banks FAQ

What is a Small Finance Bank (SFB) in India?

A Small Finance Bank is a ‘differentiated’ category of bank created by the RBI’s 2014 licensing guidelines to further financial inclusion — to supply savings products and small-ticket credit to small businesses, small and marginal farmers, micro and small industries and the unorganised sector. SFBs do ordinary banking (take deposits, make loans) but must lend a much larger share to priority sectors than a universal bank. About eleven SFBs operate, most converted from NBFC-microfinance institutions. Figures are rounded and approximate.

How are SFBs different from universal banks?

Two mandates define an SFB. It must direct 75% of Adjusted Net Bank Credit to priority sectors (versus 40% for a universal bank), and at least 50% of its loan book must be loans up to Rs 25 lakh — keeping the focus on small borrowers. SFBs also carry a higher minimum capital-adequacy ratio (15%). Figures are rounded and approximate and set by the RBI.

Can a Small Finance Bank become a universal bank?

Yes. In April 2024 the RBI set out the conditions for an SFB to apply to transition to a universal bank — at least five years’ track record, net worth of at least Rs 1,000 crore, a stock-exchange listing, profitability and low NPAs. AU Small Finance Bank, the largest SFB, has applied. The exact figures are set by the RBI and are rounded and approximate here.

Methodology & sources: see how BankPulse dashboards are sourced, verified & updated · machine-readable small-finance-banks JSON feed.

Last reviewed 22 Jun 2026 by Vikram Jain

Source: RBI — Guidelines for Licensing of Small Finance Banks in the Private Sector (2014), the on-tap licensing guidelines (2019), Report on Trend & Progress of Banking in India and Annual Report, rbi.org.in. The SFB list, counts and mandate shares are rounded and approximate, intermediate-year counts are indicative, and none is in the BankPulse Verified-numbers ledger pending reviewer sign-off. We never reproduce source text verbatim. Reviewed by Vikram Jain. Last updated 22 Jun 2026, 00:11 IST.

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