In a country as vast as India, extending the right banking services to every nook and corner is an extremely difficult task. And especially considering the unserved and underserved sections of the population, small business units, marginal farmers, micro and small businesses, without the right banking infrastructure, a majority of the population will have to suffer. This is where Small Finance Banks come into picture, reaching out to the unbanked and under-banked regions of our country.

So you might ask:

What are Small Finance Banks (SFBs)?

In a nutshell, Small Finance Banks (SFBs) are niche banks who can provide basic banking services such as acceptance of deposits and lending. And importantly, banks with the SFB license are eligible to operate as a Small Finance Bank.

Who is eligible to start a Small Finance Bank?

• Localites with 10+ years of experience in Banking and Finance
• Companies governed or owned by residents of that particular area
• Existing Non-Banking Finance Companies (NBFCs), Micro Finance Institutions (MFIs), and Local Area Banks (LABs)

Before we jump into our main topic - Best Small Finance Banks in India, let us first know:

How many small finance banks are in India?

Till date, there are a total of 12 Small Finance Banks operating in India.

Which is the best SFB in India?

As there are only 12 operational Small Finance Banks, it is very difficult to shortlist just one among them. But to answer this question, we have shortlisted the top five SFBs based on our research and some detailed investigation. But you can be the judge and accordingly invest/borrow and partake in other banking activities based on your requirements, post reading this blog.

List of Most Famous SFBs of India

1. AU Small Finance Bank

Founded in 1996, but started operating as a SFB in the year 2017, AU Small Finance Bank in the same year became a scheduled bank and also was fortunate to be listed as a Fortune India 500 company. 

Growth Stats - 1,042 touchpoints in 21 states and 3 union territories and still growing (last update September 2023)

2. Capital Small Finance Bank

Having started its operations in 2016, Capital Small Finance Bank is India’s first microfinance institution, not previously a NBFC to be granted an SFB license.

Growth Stats - 172 branches and 174 ATMs

3 .Equitas Small Finance Bank

Formerly known as Equitas Microfinance Ltd, Equitas Small Finance Bank was established in 2016, with its headquarters in Chennai. Despite their initial goal of building a network of branches across 11 of Indian states, the goal fell short. But the SFB managed to transition into a tech-oriented organization, with Equitas Small Finance Bank’s 83% of transactions being conducted online.

4. ESAF Small Finance Bank

Post considering the impressive work carried out by ESAF towards rural upliftment, the RBI issued an in-principle SFB Licence in October 2015. Now with over 56 lakh and growing customer base, the ESAF Small Finance Bank has experienced a remarkable growth and consolidation in the last few years, being known as one of the best Small Finance Banks of the country.

5. Fincare Small Finance Bank

Fincare Small Finance Bank, established in 2017, focuses on serving the underbanked segments at the base of the economic pyramid, along with mass retail and micro small enterprises. With over 500 branches and a workforce exceeding 5,000 employees, the bank operates across 13 states. It provides a wide range of innovative banking solutions, including savings and current accounts, fixed deposits, NRI fixed deposits, recurring deposits, microloans, cash overdrafts, loans against property, gold loans, institutional finance, and two-wheeler loans, catering to diverse customer needs.

Conclusion:

So here are the best five SFBs we think are doing more than what is expected of them in this time of change, but for your knowledge, we have listed down all the Small Finance Banks of our country in alphabetical order in the table below.

List of Best Small Finance Banks in India 2024 ( Alphabetical order )

But before we go you might have a few questions in mind regarding SFBs, and here are the most asked ones.

Are Small Finance Banks covered under DIGC?

Yes, small finance banks are covered under the Deposit Insurance and Credit Guarantee Corporation (DICGC)

Can Small Finance Banks issue credit cards?

No, only debit cards are permitted by the RBI

Is AU Small Finance Bank safe?

Yes, very much. It is one of the best SFBs of the country and has shown tremendous growth over the last few years.