2.1.3.3. Small Finance banks

It will provide a whole suite of basic banking products such as deposits and supply of credit, but in a limited area of operation. Thus, they can be said to be a scaled down versions of commercial banks, with both deposit-taking and loan-making functions. They can sell forex, mutual funds, insurance, pensions and can also convert into a full-fledged bank. They are established mainly for the growth of agriculture and Micro, Small and Medium industries.

Resident individuals/professionals carrying 10 years of experience in banking and finance and companies and societies owned and controlled by residents will be eligible to set up small finance banks. SFBs have a minimum paid up capital of Rs.100 crore.

Recently micro lenders, Suryoday and Utkarsh, have started Small Finance Banks (SFBs). They are offering interest rates of more than 6% (as compared to 4% offered by commercial banks) for savings bank deposits.