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Small Finance Bank – Jul 2021

Small Finance Bank Details

Last Updated 29th Jul 2021

Implemented on September 16, 2015
Approved By Reserve Bank of India
Minimum Capital Requirement ₹ 100 Cr
Products
  • Deposits- Fixed and Recurring Deposits
  • Loans- Home Loans, Personal Loans, and Auto Loans
  • Insurance
  • Pension
  • Savings and Current Account
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Top Small Finance Banks in India

Small Finance Bank FD Interest Rates RD Interest Rates
AU Small Finance Bank 3.50% - 7.00% 5.75% - 8.03%
Ujjivan Small Finance Bank 3.05% - 7.30% 6.25% - 8.00%
Equitas Small Finance Bank 3.50% - 7.00% 6.40% - 7.15%
Jana Small Finance Bank 2.50% - 7.25% 6.75% - 9.10%
ESAF Small Finance Bank 4.00% - 7.00% 6.00% - 8.50%

What are Small Finance Banks?

Small Finance Banks are financial institutions that intend to fund the financial needs of the underprivileged sections through basic banking activities of lending and deposits. These include small business units set in rural areas, small and marginalized farmers, unorganized entities, and micro and small industries. The small finance banks were set to reach out to the unbanked population in the remote and unprivileged areas.

Small Finance Banks (SFBs) was made public in India on September 16, 2015, after the Reserve Bank of India approved to set up small financial institutions, called small finance banks, as per the Union Budget of 2014-2015.

Features of Small Banks

  • It is mandatory for Small Finance Banks to set up at least 25 percent of its branches in the unbanked remote and rural areas.
  • The SFBs require a minimum capital requirement of ₹ 100 Cr.
  • The Small Finance Banks are subjected to follow the rules and regulations set by the RBI. These rules include maintenance of the CRR or cash reserve ratio, and STR or statutory liquidity ratio.
  • The Small Finance Banks can even take up activities like distribution of mutual funds, insurance products, and pension products, but only after approval from RBI.
  • Also, SFBs can engage in foreign exchange business as per their customer’s needs.

Products offered by Small Finance Banks

All Small Finance Banks deal with basic lending and deposit activities, like loans and deposits. However, what makes these products stand out is that SFBs are required to focus their products more towards the priority sector, which includes facilitating funds to poor people for housing, lending for agriculture and allied activities, funding to micro and small industries, and weaker sections of the society. These directives are regulated by the RBI, that allows Small Finance Banks to deal with the following products:

  • Deposits- All Small Finance Banks provide Fixed and Recurring Deposits. Interest rates charged by these banks on Fixed Deposit and Recurring Deposit is comparatively higher than that of regular banks. Thus, a Fixed Deposit by Small Finance Bank can earn you more revenue.
  • Loans- All Small Finance Banks deal with retail loan products like Personal, Housing, and Auto loans. These Banks are required to extend 75% of their Adjusted Net profit for the priority sector. In addition to that, 50% of the loans lent must be up to ₹ 25 Lakh.
  • Other Products- Small Finance Banks deal in other products as well such as Distribution of Mutual Funds, Pension Products, Insurance Products, Foreign Exchange, Debit Cards, Savings and Current Account Deposits

How are Small Finance Banks different from Commercial Banks?

Small Finance Banks perform various tasks like commercial banks, such as lending, allowing deposits, and they even engage in non-risk-sharing financial activities like mutual funds and insurance. Yet, they are different from the other commercial banks. Some Basic differences are listed as follows:

Difference between Small Finance Banks and Commercial Banks

Small Finance BanksCommercial Banks
The main objective of Small Finance Banks is to promote and provide banking sectors for the underbanked and underprivileged sections of the society, like poor and working-class people, or small farmers and laborers.Commercial Banks, on the other hand, provide banking services to all sections of society.
The Small Finance Banks are provisioned to extend 75% of its Adjusted Net Bank Credit to the priority sector.Commercial Banks are expected to extend 40% of their Adjusted Net Bank Credit towards the priority sector.
These Banks are set on a small scale and cater to the needs of small sections of the society, by allowing a small amount of borrowings.These Banks are instead, set on a large scale, and provide larger loan amounts to all sections of the society based on eligibility factors.
Small Finance Banks get the Differentiated Banks license by the Reserve Bank of India, which ensures that the Bank is set to serve a particular segment of the population.Commercial Banks are granted the Universal Banks license by the Reserve Bank of India, which means all banking services are set under one roof to serve all sections of the society.
These Banks require a minimum capital of ₹ 100 Cr.These Banks require a minimum capital of ₹ 500 Cr.
Examples of Small Finance Banks: Ujjivan Small Finance Bank, Jana Small Finance Bank, etc.Examples of Commercial Bank: All Public and Private sector Banks, like SBI, PNB, Axis Bank, ICICI Bank, and HDFC Bank, etc.

  • 3-in -1 account by Equitas Small Finance Bank
    Equitas Small Finance Bank has introduced a tripartite account for saving, trading and Demat investments under one umbrella entity. The product will allow account holders a secure, seamless and convenient way to invest in their choice of investment instruments, including equity, FDs, and mutual fund products. In addition to this, account holders will be able to transfer money seamlessly between their bank account. The bank stated that it will offer stockbroking and Demat services through a referral arrangement with brokerage firms for trading and depository services.

FAQs

Does Small Finance Bank provide credit and debit cards?

Small Finance Banks allow current and savings account facilities to their customers. Thus, they can issue debit cards. However, as per RBI’s directive, these banks are not allowed to issue credit cards.

Are Small Finance Banks approved by RBI?

All Small Finance Banks in India, are approved by the Reserve Bank of India under the Banking regulations Act of 1949. These Banks are accustomed to following the rules and patterns set by the RBI, similar to all other banks.

Is it safe to open an FD in a Small Finance Bank?

Unlike commercial banks, small finance banks also provide fixed deposits. Also, since these banks are newly established, they usually offer higher interest rates on FD than other commercial banks in order to attract more customers. Also, these FDs are equally safe and sound.

Can I take a loan from a Small Finance Bank?

Small Finance Banks do offer loans like commercial Banks, such as personal loans, housing loans, consumer loans, and auto loans.


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Our News - Jul 2021
  • 2021-06-28 : FD rates revised for AU Small Finance Bank
    With effect from June 23, 2021, AU small Finance Bank revised its FD rates, the FD rates for 7 days to 1 month 15 days is 3.50%, for 1 month 16 days to 3 months is 4% and it stands at 4.50% for 3 months 1 day to 6 months. Further, the FD rates for 6 months 1 day to 12 months is 5%, for 12 months 1 Day to 15 months and it is 6.10% and stands at 6% for 15 months 1 Day to 24 months. The FD rates for long tenors of 24 months 1 day to 36 months is 6.25%, for 36 months 1 day to 60 months and 6% and for 60 months 1 day to 120 months, it is 6.25%.
  • 2021-06-16 : Ujjivan Small Finance Bank collaborates with MoEngage
    Ujjivan Small Finance Bank has collaborated with customer engagement platform MoEngage to provide digital banking services in remote areas of the country. The aim is to build a wide presence of the bank with customers in the unserved regions through digital services.
  • 2021-05-20 : ESAF Small Finance Bank revised its MCLR
    With effect from 18 May 2021, ESAF Small Finance Bank changed its MCLR. The overnight and one-month MCLR is 14.11% and 14.14%, respectively. The three months and six months MCLR is 14.20% and 14.29%, respectively. Further, the MCLR for one year stands at 14.58%. The revised rates will impact MCLR based home loans.
  • 2021-05-12 : Revised FD rates for Jana Small Finance Bank
    Jana Small Finance Bank changed its FD rates with effect from May 3, 2021. The FD rates for 7 to 14 days is 2.50%, for 15 to 60 days it is 3%. The fixed deposit rate for a tenor of 61 to 90 days is 3.75%, for 91 to 180 days it is 4.50%, and it is 5.50% for 181 to 364 days. Further, FD rates for 365 days is 6.25%, fixed deposit rate for 1 year one day to 3 years is 6.50 %, and it is 6.75% for 3 years 1 day to 4 years 364 days. . The FD rates for 5 years is 6%, and for a tenor of 5 years and 1 day to 10 years the fixed deposit rate is 6.50%.
  • 2021-04-30 : AU Small Finance Bank Q4 net profit up 38 per cent at Rs 169 cr
    AU Small Finance Bank reported a 38% hike in its net profit at Rs 168.98 crore for the last quarter of the fiscal ended March 2021. The profit was boosted by retail loans like home, personal, LAP, two-wheeler, car, education and doctor loan along with deposits which include fixed and recurring deposits. Total income during Q4 FY21 rose to Rs 1,569 crore as against Rs 1,366.60 crore. Interest income moved up to Rs 1,292.37 crore during the reported quarter from Rs 1,183.45 crore in the year-ago period.
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