Small Finance Banks (SFBs) have made an immense contribution towards financial inclusion in India by providing affordable banking facilities to unprivileged sections of the society, small enterprises, and rural areas.
As of 31st December 2024, 12 SFBs are functional in India, featuring well-known brands such as AU Small Finance Bank, Equitas Small Finance Bank, and Ujjivan Small Finance Bank.
These banks offer more interest on savings and fixed deposits than the conventional banks and thus are welcomed by depositors. They aim at financial inclusion and act as a bridge between conventional banks and individuals unable to access banking services.
In this blog, we’ll explore the 10 best Small Finance Banks in India, highlighting their features, benefits, and why they stand out in the banking industry.
What are Small Finance Banks?
Small Finance Banks are special banks meant for people who don’t normally get to access common banking facilities, such as small businessmen, farmers, and the low-income segment.
These banks give basic financial products like savings, fixed deposits, and loans, primarily targeting those living in rural and semi-urban segments.
They are the same as ordinary banks but serve small borrowers and small businesses better. The objective of Small Finance Banks is to bring banking within reach of all, particularly those who may find it difficult to obtain loans from larger banks.
Objectives of Small Finance Banks
- Provision of Savings Facilities: SFBs intend to provide facility of savings to the unserved and underserved segments to promote financial inclusion.
- Supply of Credit to Target Sectors: They target extending credit to small business units, small and marginal farmers, micro and small industries, and other unorganized sector entities, thereby fostering economic growth at the grassroots level.
- Priority Sector Lending: SFBs are required to lend a substantial percentage of their lending to priority sectors. In particular, 75% of their net credits should go towards priority sector lending, and 50% of their loan book should be loans of up to ₹25 lakh.
- Branch Opening in Unbanked Geographies: For greater banking outreach, SFBs must open not less than 25% of their branches in unbanked geographies, thus enhancing financial service delivery in the rural areas.
- Technology-Lite Operations: SFBs are oriented towards following high technology-low cost operations to facilitate effective delivery of services and maintaining operational costs at low levels, to the advantage of the bank as well as customers.
By pursuing these goals, Small Finance Banks have a significant role in bringing the underprivileged sections of society into the formal financial sector, thus ensuring inclusive economic growth in India.
List of 10 Best Small Finance Banks in India
1. Ujjivan Small Finance Bank
Ujjivan Small Finance Bank, based in Bangalore, India, looks to promote financial inclusion by providing a wide portfolio of banking services to underbanked segments like savings and current accounts, fixed and recurring deposits, vehicle financing, micro and housing loans, and small enterprise loans.
Digital banking services in the form of internet, phone, and mobile banking are also offered by the bank. Significantly, its ATMs are biometric-enabled, and customers can withdraw money through biometric authentication.
As of December 31, 2023, Ujjivan SFB has 2,383 physical touchpoints spread across 25 states and union territories, servicing about 11 million customers, reflecting its resolve to fill the gap between formal banking services and financially excluded communities.
Founded in: 2017
Services offered:
- Savings and Current Accounts
- Fixed and Recurring Deposits
- Micro and Small Business Loans
- Housing Loans
- Vehicle Loans
- Digital Banking (Internet, Mobile, and Phone Banking)
- Biometric-enabled ATM Services
- Insurance and Investment Products
- Remittance and Payment Services
Website: https://ujjivansfb.in/
2. AU Small Finance Bank
AU Small Finance Bank, with its headquarters in Jaipur, India, evolved from a vehicle finance company to become the largest technology-driven small finance bank in the country.
In 2017, it was granted the license of Small Finance Bank by the Reserve Bank of India (RBI) and has been growing rapidly ever since. As of December 31, 2023, AU Bank has 2,383 branches and ATMs in 25 states and union territories, with around 11 million customers.
The bank concentrates on providing an extensive array of financial products such as savings and current accounts, fixed deposits, loans, insurance, and online banking solutions for retail and business clients.
Founded in: 1996
Services offered:
- Savings and Current Accounts
- Fixed and Recurring Deposits
- Personal and Business Loans
- Credit and Debit Cards
- Digital Banking (Mobile, Internet, and WhatsApp Banking)
- Video Banking Services
- Wealth Management and Investment Services
- Insurance and Mutual Funds
- Biometric-enabled ATM Services
- Payment and Remittance Solutions
Website: https://www.aubank.in/
3. Shivalik Small Finance Bank
Shivalik Small Finance Bank with its head office in Saharanpur, Uttar Pradesh, India, is a forward-thinking bank dedicated to offering affordable and customer-friendly banking services.
Having been an Urban Cooperative Bank for more than 25 years, Shivalik was the first Small Finance Bank in India to make the shift from the cooperative banking segment.
Having a record of over 600,000 unique customers, 68 branches, and 93 business correspondent branches, Shivalik SFB aims to be devoted to financial inclusion through serving unreached communities.
It also offers insurance, debit cards, demat and trading accounts, as well as secure payment solutions. Utilizing technology and innovation, Shivalik has been increasing its banking experience with a very customer-centric focus.
Founded in: 1998
Services offered:
- Savings and Current Accounts
- Fixed and Recurring Deposits
- Personal and Business Loans
- Home and Gold Loans
- Vehicle and Commercial Loans
- Digital Banking (Mobile and Internet Banking, UPI, IMPS, NEFT/RTGS)
- Debit Cards (RuPay Classic and Platinum)
- Insurance (Life, Health, Motor, and Home Insurance)
- Demat and Trading Accounts
- Payment and Fund Transfer Services
Website: https://shivalikbank.com/
4. Fincare Small Finance Bank
Fincare Small Finance Bank is a new age retail bank with a ‘Rurban’ (rural-urban) orientation, with its pillars of trust, technology, and transparency.
It commenced business in May 2017 with the approval of Reserve Bank of India and through the consolidation of two NBFC Microfinance Institutions, Future Financial Services and Disha Microfin.
The bank is committed to financial inclusion with both underserved and high-end segments. With technology-based banking products, Fincare seeks to fill the gap between conventional banking services and the changing needs of its customers.
Founded in: 2017
Services offered:
- Savings and Current Accounts
- Fixed and Recurring Deposits
- Microloans and Business Loans
- Affordable Housing Loans
- Gold Loans
- Vehicle Loans
- Digital Banking (Mobile and Internet Banking, UPI, IMPS, NEFT/RTGS)
- Debit and Credit Cards
- Insurance and Investment Services
- Corporate and SME Banking
Website: https://fincarebank.com/
5. Capital Small Finance Bank
Capital Small Finance Bank, with its headquarters in Jalandhar, India, began operations in April 2016 as India’s first small finance bank. It was started in 2000 as Capital Local Area Bank and then focused mainly on the districts of Punjab, i.e., Jalandhar, Kapurthala, and Hoshiarpur.
After 2013, the bank ventured into Ludhiana and Amritsar, having 76 branches as of June 2016. After getting the approval of the Reserve Bank of India, it converted into a small finance bank in April 2016.
The bank provides a wide array of financial products and services, such as savings and current accounts, term deposits, and other loan facilities like housing, auto, and personal loans.
Founded in: 2000
Services offered:
- Savings and Current Accounts
- Fixed and Recurring Deposits
- Home Loans
- Personal Loans
- Auto Loans
- Business and MSME Loans
- Kisan Credit Cards (Agricultural Loans)
- Insurance Services
- Debit Cards
- Digital Banking (Net Banking, Mobile Banking, UPI, IMPS, NEFT/RTGS)
Website: https://www.capitalbank.co.in/
6. Jana Small Finance Bank
Jana Small Finance Bank, previously called Janalakshmi Financial Services, has seen tremendous success since its start. Established in 2006 as an NBFC-MFI, it received in-principle approval from the Reserve Bank of India in 2015 to start a Small Finance Bank. The bank was started on March 28, 2018, and since then has made a strong presence across India.
It had opened its 300th branch in Hoshangabad, Madhya Pradesh, by March 2020, and by March 2022, the bank expanded to 715 branches, including 259 in unbanked rural hubs, in 19 states and three union territories. Jana Small Finance Bank has been centered on financial inclusion in its journey, with more than 8 million customers since 2008.
Founded in: 2006
Services offered:
- Savings and Current Accounts
- Fixed a
- nd Recurring Deposits
- Home Loans
- Personal Loans
- Business and MSME Loans
- Two-Wheeler and Auto Loans
- Gold Loans
- Microfinance and Group Loans
- Insurance and Investment Services
- Digital Banking (Mobile and Internet Banking, UPI, IMPS, NEFT/RTGS)
Website: https://www.janabank.com/
7. Equitas Small Finance Bank
Equitas Small Finance Bank, with its head office in Chennai, India, is a prominent financial institution committed to financial inclusion of the unserved and underserved segments of the nation.
With a ‘digital first’ strategy, Equitas focuses on innovative, paperless, and contactless smart banking solutions, which provide greater convenience and accessibility to its customers.
Being a scheduled commercial bank approved by the Reserve Bank of India, Equitas continues to empower livelihoods and lives by rendering quality and transparent financial solutions, thus redefining the banking experience for millions.
Founded in: 2016
Services offered:
- Savings and Current Accounts
- Fixed and Recurring Deposits
- Microfinance and Small Business Loans
- Home and Affordable Housing Loans
- Vehicle and Commercial Loans
- Gold Loans
- Agriculture and MSME Loans
- Insurance and Investment Services
- Debit and Credit Cards
Website: https://www.equitasbank.com/
8. Suryoday Small Finance Bank
Suryoday Small Finance Bank is a digital bank of the new generation that is dedicated to providing simple and affordable banking services in India.
With a vision to enable 1% of Indian families to have a better financial future, the bank has already served over 2.8 million happy customers.
It has over 700 banking touchpoints in 15 states and union territories, backed by a team of over 7,700 employees. Suryoday’s product portfolio consists of current and savings accounts, recurring and fixed deposits, microfinance, home loans, and vehicle loans.
The bank focuses on customer-centric offerings with greater interest rates on fixed deposits and ease of digital banking through net banking and mobile banking services.
Founded in: 2008
Services offered:
- Savings and Current Accounts
- Fixed and Recurring Deposits
- Microfinance and Group Loans
- Home Loans
- Vehicle Loans
- Business and MSME Loans
- Gold Loans
- Insurance and Investment Services
- Debit Cards
Website: https://www.suryodaybank.com/
9. North East Small Finance Bank
North East Small Finance Bank (NESFB) with head office in Guwahati, Assam, the region’s first small finance bank.
The bank provides a complete suite of financial products and services such as savings and current account, fixed deposit and recurring deposits, and all types of loan facilities that can be suited as per the needs of the people, small industries, and farming community.
With a strong emphasis on digital banking, NESFB offers internet and mobile banking facilities, increasing convenience and accessibility for its customers.
The mission of the bank is to facilitate financial inclusion by providing banking services to the unbanked and underserved segments in the northeastern states of India, thus contributing to the economic growth of the region.
Founded in: 2017
Services offered:
- Savings and Current Accounts
- Fixed and Recurring Deposits
- Microfinance and Group Loans
- Home Loans
- Agriculture and MSME Loans
- Vehicle and Commercial Loans
- Gold Loans
- Insurance and Investment Services
- Debit and Prepaid Cards
Website: https://www.nesfb.com/
10. Utkarsh Small Finance Bank
Utkarsh Small Finance Bank, which has its headquarters in Varanasi, Uttar Pradesh, is committed to offering a full spectrum of banking and financial services, with a particular focus on microfinance to unserved and underserved sections of society.
The bank provides savings and current accounts, fixed and recurring deposits, micro, small, and medium enterprise (MSME) loans, housing loans, insurance, mutual funds, and remittance services.
With its firm footing in rural and semi-urban pockets, Utkarsh Small Finance Bank looks to facilitate financial inclusion and enhance the capability of low-income groups by providing inclusive and affordable banking products.
Founded in: 2016
Services offered:
- Savings and Current Accounts
- Fixed and Recurring Deposits
- Microfinance and Group Loans
- Home Loans
- MSME and Business Loans
- Vehicle and Commercial Loans
- Gold Loans
- Insurance and Investment Services
- Debit and Prepaid Cards
- Digital Banking (Mobile and Internet Banking, UPI, IMPS, NEFT/RTGS)
Website: https://www.utkarsh.bank/
How to Choose the Right Small Finance Banks in India?
Selecting the right Small Finance Bank (SFB) in India is a careful decision involving various considerations to make sure it suits your needs. Below is a list of all the things you should keep in mind:
1. Savings & Deposit Interest Rates
- Compare savings account interest rates among various SFBs. Some SFBs provide higher interest rates compared to regular banks.
- Verify fixed deposit (FD) and recurring deposit (RD) rates if you are going to invest in them.
2. Loan Products & Interest Rates
- If you require a loan (personal, business, home, or car loan), compare the interest rates and repayment period.
- Check for processing charges, prepayment penalties, and other additional costs before choosing an SFB.
3. Digital Banking & Customer Services
- Ensure the bank offers a hassle-free mobile application and internet banking for convenient transactions.
- Verify efficiency in customer care – prompt response time, availability 24 hours a day and 7 days a week, and grievance redressal system.
4. Branch & ATM Network
- Select an SFB with an extensive branch and ATM network, particularly in your city or locality.
- If residing in a village, ensure availability of branches closer to your locality for easy convenience.
5. Safety & Reliability
- Ensure that the bank is regulated by the RBI and maintains all required banking standards.
- Check that deposits in the bank are insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC), which offers insurance up to ₹5 lakh on deposits.
6. Minimum Balance Requirement
- Certain banks have a minimum balance which needs to be held in a savings account. Opt for an SFB with minimum or zero balance requirements if flexibility is your preference.
7. Charges & Fees
- Examine fees on services such as fund transfer, issue of cheque book, ATM withdrawals, and account maintenance.
- Compare penalty charges and hidden fees for non-maintenance of balance or early FD withdrawal.
8. Customer Reviews & Reputation
- Observe customer feedback, online ratings, and reviews prior to account opening.
- Examine the financial performance and stability of the bank to prevent future problems.
9. Other Services
- Seek additional services like insurance, investment, forex services, and remittances if applicable to your needs.
10. Special Benefits to Specific Groups
- Certain SFBs provide special benefits to farmers, MSMEs, self-employed, and women entrepreneurs—see if you are eligible for any special benefits.
Conclusion
Small Finance Banks have a crucial role in financial inclusion as they make key banking services accessible to underserved customers, small businesses, and rural economies. All of the best 10 Small Finance Banks have something to offer, including higher rates on savings, low-cost loans, and smooth digital banking.
While choosing the right bank, pay attention to interest rates, customer service, loan schemes, branch presence, and digital offerings. Whether you want to save, invest, or borrow, these banks offer safe and sound financial solutions.
Selecting the appropriate Small Finance Bank guarantees smooth banking that suits your financial objectives. Browse through your options and choose the one that best suits your requirements.
FAQs
How are Small Finance Banks unique compared to regular banks?
SFBs are unique from conventional banks as they emphasize financial inclusion through providing credit to small and marginal entrepreneurs, farmers, and people with poor access to banking. They also give more interest on savings and deposits.
Do Small Finance Banks provide more interest on savings accounts?
Yes, most SFBs provide a higher interest rate on fixed deposits and savings accounts than traditional banks, making them a preferable option for depositors.
Are there minimum balances in Small Finance Banks?
Certain SFBs have zero-balance savings accounts, but some of them can have a minimum balance. Best to verify the same with the bank in question before opening the account.
Are Small Finance Banks secure?
Yes, Small Finance Banks are governed by the Reserve Bank of India (RBI) and adhere to stringent banking regulations. Deposits in Small Finance Banks are insured up to ₹5 lakh under the Deposit Insurance and Credit Guarantee Corporation (DICGC).
Can I take a loan from a Small Finance Bank?
Yes, SFBs offer different loans, such as personal, business, home, and vehicle loans, usually at competitive interest rates and with flexible repayment terms.
