Top 10 Small Finance Banks in India [2024]

Even though the world considers India a “Developed Nation”, as per data for the year 2021, it ranked 24^th position in the list of Unbanked Countries of the world. It means that the banking system of the nation is still not up to the mark. For that reason and to tackle this issue, India has set up numerous Small Finance Banks. In this article, you will get detailed information on the Top 10 Small Finance Banks in India.

Keep reading!

What are Small Finance Banks?

Basically, “Small Finance Banks” are financial institutions that are specially established to provide banking services to remote, unserved, and unbanked parts of the country. Therefore, their prime objective was to expand access to financial services to Small Finance Banks comprising marginal farmers, and micro, medium, and small enterprises (MSMEs), small business units. In simple words, it provides banking services to tier 3 and tier 4 areas i.e., rural and semi-urban areas. Thus, you will get banking services even if you reside in the remotest part of the country.

Top 10 Indian Small Finance Bank: A Brief Overview

All these small finance banks are registered under the Companies Act, 2013, and thereafter, named “Public Limited Companies.” Evidently, they are governed by the provisions of the Reserve Bank of India Act, of 1934.

Now, let’s dive into the details!

1: AU Small Finance Bank

Initially, this Jaipur-based small finance bank was established as a vehicle finance company named AU Financiers (India) ltd in 1996. Later on, it decided to serve the public having marginal income and MSMEs. Thus, the founding director Mr. Sanjay Agarwal converted it into a small finance bank in the year 2017. Its market capitalization as of now is INR 41,427.00 crore, therefore, it is a part of Fortune 500 companies in India. Also, RBI approved it to operate as a Scheduled Commercial Bank.

2: Equitas Small Finance Bank

This bank is headquartered in Chennai (Tamil Nadu). Earlier, it used to operate as a fully-owned subsidiary of the entity Equitas Holding Ltd. Earlier, it began its operation in the year 2007-11 in the segment of microfinance, vehicle, and housing finance. Later on, all these subsidiaries merged and received the license in the year 2016 to form a small finance bank. If you are planning to make a diversified portfolio then you must include the stock of Equitas Small Finance Bank. The reason for this is its excellent performance in the last two years and currently has a market capitalization of INR 6,949 crores. They are also associated with multiple financial services, for example, HDFC and Niyo.

3: Ujjivan Small Finance Bank

It is a leading small finance bank based in Bengaluru. Eventually, after its establishment in the year 2005, it operated as a Non-Banking Financial Company and its name was Ujjivan Financial Services Limited. In the year 2017, it transformed into a small finance bank. It offers a good quarter to its users because it focuses on mass markets and has a market capital capitalization of 5,678 crores. Hence, it aims to provide financial services to economically active poor segments by building well-defined financial inclusion.

4: Utkarsh Small Finance Bank

Utkarsh Small Finance Bank Limited is an Indian Scheduled small finance bank established in April 2016. Earlier it was known as Utkarsh Micro Finance Private Limited. Presently, its headquarters is in Varanasi (Uttar Pradesh). Afterward, it expanded its operations in various states of India- Bihar, Jharkhand, Chattisgarh, Madhya Pradesh, Haryana, and Uttarakhand. Did you know it also attracted many international investors like Common Wealth Development Corporation, Norwegian Microfinance Initiative, HDFC Standard Life, ICICI Prudential Life Insurance, etc? Thus, it led to a considerable increase in their market capital up to INR 1,350 crores.

5: Fincare Small Finance Bank

It was formed by the merging of two micro non-banking financial institutions namely Future Financial Services and Disha Microfin. Earlier, it began its commercial financial services after receiving a license from RBI in the year 2017. Its headquarters is in Bengaluru (Karnataka). In time, its market capital is INR 1,330 crore. Another point is the active participants of Fincare Small Finance Bank are micro-entrepreneurs and microenterprises. Thus, you can avail of all the smart banking products consisting of deposit, credit, cash overdrafts, microloans, gold loans, two-wheeler loans, health insurance, general insurance, etc.

6: Suryoday Small Finance Bank

Suryoday Small Finance Bank evolved from Suryoday Micro Finance. Basically, “Suryoday” is a Sanskrit word meaning sunrise. Therefore, this word signifies a new dawn and its transformation into a small finance bank to serve the unbanked sections of society in the year 2017. Till now, its headquarters is in Navi Mumbai (Maharashtra). Eventually, this small financial bank with a market capitalization of INR 1,216 crore claims that it will offer you the best customer experience. Also, it offers digital banking services, and different types of loans like MFI loans, Vikas Loans, Shopkeeper Loans, etc.

7: Capital Small Finance Bank

Do you know it is India’s first small finance bank? Initially, it was known as “Capital Local Area Bank” and was later established in April 2016 as a fully functional small finance bank. Even though its headquarters is in Jalandhar (Punjab) , it also expanded its operations in Ludhiana, Kapurthala, Hoshiarpur, and Amritsar. Presently, it has a market capital capitalization of INR 1169.92 crore. Presently, the equity shares of this bank are listed on BSE (Bombay Stock Exchange).

8: ESAF Small Finance Bank

The acronym “ESAF” refers to the Evangelical Social Action Forum. It began its journey in 1992 in the form of an NGO with the objective of the wholesome economic transformation of poor and marginalized groups of society. Later on, it re-established itself as a small finance bank in March 2017. Its headquarters is located in Thrissur (Kerala). Also, the market capital of this bank is INR 997.78 crore.

9: Jana Small Finance Bank

You must have heard this name because it is one of the leading banks in this category in terms of assets under management. It commenced functioning as a small finance bank in March 2018. It is flourishing heavily with 166 branches in unbanked rural areas and 134 ATMs in 18 states along with three union territories of India. It has around 30 lakhs active customers and a market cap capitalization of 700 crores.

10: North East Small Finance Bank

As the name suggests, North East Small Finance bank is the only institution from the North-Eastern region of India to receive approval from RBI to establish itself as a small finance bank. It commenced operations in October 2017 through high-end technology and low-cost operations. It has a market capitalization of INR 313.54 crores. You can also avail of the facility of Doorstep Banking along with regular services of debit and credits.

Latest Updates on Small Finance Bank of India

Here are some recent updates on Small Finance Banks in India-

(A) AU Small Finance Bank introduces Zenith+ Credit Card

AU Small Finance Bank has recently unveiled the Zenith+ Credit Card, marking a significant stride in the realm of super-premium credit cards within India. With this innovative offering, AU Small Finance Bank aims to elevate customer convenience while reducing dependence on cash transactions.

(B) High Fixed Deposit Interest Rates Offered by SFBs

Small Finance Banks have emerged as formidable contenders in the fixed deposit (FD) domain, challenging the dominance of traditional banks. Notably, several SFBs are currently offering compelling fixed deposit interest rates, with figures soaring as high as 9.25%, thereby surpassing those provided by larger banking institutions.

(C) Diversification and Product Ranges

Industry experts emphasize the necessity for Small Finance Banks to diversify their product portfolios comprehensively. They advocate for SFBs to extend beyond singular product offerings and customer segments, urging them to incorporate a broader spectrum of financial services such as home loans, commercial banking, and digital banking.

These recent developments the dynamic growth and evolving landscape within India’s small finance banking sector. Stay tuned for further advancements and updates!

(D) Merger of Fincare Small Finance Bank and AU Small Finance Bank

Did you hear the news? The Reserve Bank of India (RBI) has recently granted approval for the merger of Fincare Small Finance Bank with AU Small Finance Bank, set to take place on April 1, 2024. Yep, it’s just around the corner! And guess what? All those Fincare branches you’re familiar with will soon be rebranded as AU Small Finance Bank branches, starting from that very date.

Here’s a bit of background: RBI gave the green signal following the Competition Commission of India’s (CCI) approval of the merger. After the merger, AU Small Finance Bank will take the lead, and shareholders of Fincare will receive shares in the newly combined AU Small Finance Bank.

It’s like a win-win situation for everyone involved! For detailed information, visit the article “7 Biggest Bank Merger List in India – 2024.”

Conclusion

The small finance banking sector of India has immense scope for growth. Even though it is still in its nascent stage, it immensely aids in the improvement of the banking sector in rural and semi-urban areas of the nation. Another interesting thing is you can gain immense profits by investing in the stocks of small finance banks because of their high growth potential.