New League of Banking in India with Small Finance Banks

Abstract

Despite the relentless efforts by the government there exists majority of people who are financially excluded. To better serve the people the government had initiated the process of establishing Small Finance Banks under private ownership which are primarily aimed at providing financial services and products as per the financial requirements of the semi-urban and rural population. 10 financial institutions were permitted to start banking operations with Small Finance Bank license and can operate across the country especially in the rural areas. The main players in the NBFC segment had acquired the Small Finance Bank license and started the operations as they are performing similar financial operations in specific areas of the country. The operations of these banks are performed in a highly technology driven environment which are highly cost effective helping to reach the target customers through committed workforce. With these advantages the banks are in a position to provide affordable and accessible financial services and products to the excluded segments to meet their respective financial requirements. The present paper discusses the evolution of Small Finance Banks along with their significance to the economy, the advantages and disadvantages with this type of financial institutions, the progress of Small Finance Banks over the years through select parameters and finally concludes with few suggestions to further reach the under-served and unserved segments of the population.

Keywords: Small Finance Banks, Financial Inclusion, NBFCs, Information and Communication Technology, Micro Credit, Reserve Bank of India.