How Many Small Finance Banks Are There in India?
Small Finance Banks (SFBs) are a unique category of banks introduced by the Reserve Bank of India (RBI) to promote financial inclusion by providing banking services to underserved and unbanked segments of society. These banks play a vital role in extending credit to small business units, farmers, micro and small industries, and other sectors that lack access to mainstream banking.
Background and Purpose of Small Finance Banks
The concept of Small Finance Banks was introduced by the RBI in 2014, following recommendations from the Nachiket Mor Committee on Financial Inclusion. The primary objective is to provide basic banking services, encourage savings, and offer loans to marginalized groups, thereby fostering inclusive economic growth.
Licensing and Regulatory Framework
Small Finance Banks are governed by the Banking Regulation Act, 1949, and are licensed under Section 22 of the Act. They are required to comply with RBI guidelines related to capital adequacy, priority sector lending, and corporate governance. SFBs must maintain a minimum paid-up capital and are subject to regular inspections and audits by the RBI.
List of Small Finance Banks in India
As of 2025, there are 12 operational Small Finance Banks in India:
- AU Small Finance Bank
- Capital Small Finance Bank
- Equitas Small Finance Bank
- ESAF Small Finance Bank
- Fincare Small Finance Bank
- Jana Small Finance Bank
- Suryoday Small Finance Bank
- Ujjivan Small Finance Bank
- Utkarsh Small Finance Bank
- North East Small Finance Bank
- Shivalik Small Finance Bank
- Unity Small Finance Bank
Key Features of Small Finance Banks
- Provide savings and deposit accounts to individuals and small businesses
- Offer loans and credit facilities to micro, small, and medium enterprises (MSMEs)
- Focus on financial inclusion and serving rural and semi-urban areas
- Comply with priority sector lending norms set by RBI
- Operate with limited area of operations compared to commercial banks
Impact of Small Finance Banks
Small Finance Banks have significantly contributed to increasing access to formal banking, promoting entrepreneurship, and supporting the growth of MSMEs. They have helped bridge the gap between traditional banking and the needs of underserved communities.
Challenges Faced by Small Finance Banks
- Limited resources and reach compared to larger commercial banks
- High operational costs due to focus on small-ticket loans
- Competition from fintech companies and digital lenders
- Need for continuous innovation and technology adoption
- Maintaining asset quality and managing risks
The Future of Small Finance Banks in India
With the growing emphasis on financial inclusion, Small Finance Banks are poised to play a crucial role in India’s banking landscape. Their ability to innovate, leverage technology, and cater to the unique needs of local communities will determine their long-term success and sustainability.
Conclusion
There are currently 12 Small Finance Banks operating in India, each dedicated to expanding financial access and supporting economic growth in underserved regions. As these banks continue to evolve, they will remain integral to India’s mission of inclusive development.
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