Small Finance Banks .

 

The Indian economy's ability to function depends heavily on the banking industry. In addition to commercial banks, the Reserve Bank of India's( RBI) regulation has seen the introduction of some new banking models, such as payments and small finance banks( SFBs), into the economy. Let's learn more about a small finance bank in this blog, including what it does, how it operates, and what products SFBs offer.

Small Finance Banks Meaning :

Under the direction of the Indian government, the RBI established a particular category of banking known as small finance banks in India. By primarily extending basic banking services to underserved and unserved segments, such as small and marginal farmers, small business units, micro and small industries, and unorganized entities, they were introduced with the goal of advancing financial inclusion.

All fundamental banking services, such as lending and receiving deposits, are provided by small finance institutions. The RBI released the Small Finance Banks guidelines in November 2014 following the announcement made during the Union Budget for the fiscal year 2014– 15. Only 10 of the nearly 72 entities from various segments who applied for the license on November 24, 2014, received it. AU Financiers was the only asset- based NBFC to get this coveted license.

Small Finance Banks in India :

Rural areas are home to the majority of our population. And extending banking services to India's most isolated areas is difficult. Small Finance Banks are being expanded in India in an effort to give underbanked and unbanking areas of the country access to bank credit and services.

How do Small Finance Banks Work :

Small Finance Banks primarily serve as savings vehicles because they use their cutting-edge technology and low-cost operations to provide credit facilities to small businesses, micro and small industries, small and marginal farmers, and other unorganized sectors. 

The range of tasks a Small Finance Bank performs is listed below:

To serve underserved and unserved segments of the nation, SFBs in India primarily conduct basic banking activities.

They can provide loans and deposits, but they are unable to establish any subsidiaries to provide non-banking financial services.

Are Small Finance Banks under RBI :

Yes, Small Finance Banks are active in India under the RBI's regulation and the apex bank, as amended periodically by the Banking Ombudsman Scheme of 2006. According to the Companies Act of 2013, SFBs are regarded as public limited companies and are occasionally subject to other pertinent statutes and directives, such as the Banking Regulations Act, 1949, and the RBI Act.

Product and Service offered by Small Finance Banks :

Basic banking services are provided by small finance banks, including loans, current accounts, fixed deposits, and savings accounts.

Such straightforward tasks can be carried out by the banks with the RBI's prior consent and after meeting the requirements. The activities can involve dispersing mutual fund units, pension plans, insurance policies, and other products without requiring any commitment of personal funds.

According to the needs of their clients, the SFBs can even become authorized dealers in the foreign exchange industry.