Small finance bank: UPSC Daily Important Topic | 18 March 2022

Small finance bank

✓Small Finance Banks are the financial institutions which provide financial services to the unserved and unbanked region of the country.

✓They are registered as a public limited company under the Companies Act, 2013.

Objective

✓Access to financial services: The main purpose behind having small finance banks is to expand access to financial services in rural and semi-urban areas. These banks can do almost everything that a normal commercial bank can do but at a much smaller scale.

✓Basic banking services: It will offer basic banking services, accept deposits and lend to underserved sections of customers, including small business units, small and marginal farmers, micro and small industries, and even entities in the unorganised sector.

✓Alternative institution: Small finance banks have the potential to provide an alternative to some of the existing institutions with their mandated focus on small and medium businesses, the informal sector, small and marginal farmers and thus on increasing financial inclusion and serving a variety of unserved clients in the hinterland and tier three and four cities and towns.