What is Small Finance Bank? Small Finance Bank Functions, Fees, Interest Rate [2022]

Friends, nowadays you must have heard a lot about small finance bank, then you must have wondered what is small finance bank and how small finance bank works and what is the difference between small finance bank and general bank.

Why RBI needed to bring in a small finance bank and it is safe to open an account inside the small finance bank, all those who know what is the fees and charges of the small finance bank account, friends, there is not much difference between the normal bank and the small finance bank. Current account, debit card, and loan provides services etc.

Yet these ordinary banks do not fall in the category of banks like SBI and PNB, what is the purpose of their formation and how small finance bank works Let’s know – what is small finance bank? Functions of small finance bank

What is Small Finance Bank?

Small Finance Bank also provides its services like savings account, current account, debit card, and loan, like a small finance bank.

Small finance banks also provide credit and remittance services like ordinary banks, yet they do not fall under the category of general banks because one of their jurisdictions is certain by the RBI that it can function only in this area.

Along with opening a bank account, small finance bank account can also disburse loans up to Rs 25 lakh to the customer. This bank takes less time than the normal bank to disburse the loan and does less paperwork and has very little scope.

There are only 10 small finance banks in our country so far, that is, the RBI had granted license to 10 small finance banks in 2015 to provide banking services to the common citizen at a lower cost.

Who do small finance banks give loans to?

Small Finance Bank can give small finance bank loans to those small businessmen in their field of work, and for cottage industries, agriculture, small hustle and bustle, agribusiness, for domestic work, and for such works as you want to set up a business.

Friends, those which are such backward and small industries and are agricultural activities are not recognized as a big industry, that is why the general bank or the big banks do not give loans i.e. do not give loans.

And the agriculture class, small businesses, small industries, banks are deprived of any kind of financial assistance, so small finance bank has been established.

When and how was the Small Finance Bank started?

The functions of small finance bank – Friends as you know, the population of our country is very large and we have small businesses, and cottage industries, small scale industries are done on a very large scale but they need a financial assistance to expand further.

And such small and storey industrialists and businessmen do not have much money, they do them to a limited area and these businesses do not expand to much area because when they go to the bank to take a loan, they have to give a guarantee, then their business is not so big that they are guaranteed, so the normal bank did not take the loan. and there is a finance company that gives loans to these people.

But they charge a lot of interest from them and deduct more money in the name of charges and they have nothing to do with the RBI, in such a way, they do not follow the rbi’s rules. In 2015, the RBI took such a step to reduce the private banks of the private sector and to reduce all the non-performing accounts. Tax should be given banking service license to them.

So that the burden of work on the government banks is reduced and the debt burden in the private bank is reduced, banking service should be provided even in remote areas and the loan service should be provided for doing small business in rural areas and for agricultural work i.e. loan should be provided.

How to Open Small Finance Banks – Small Finance Bank Licenses

Friends, if any small finance bank wants to get a banking license for itself, it has to apply under Section 22(1) of the Banking Regulation Act, 1949 and it has to fulfill certain necessary conditions after which it gets the license.

Small Finance Bank Registration

If a small finance bank wants to register itself, it is registered under the Companies Act, 2013, for which it has to follow some rules of the RBI.

Small Finance Bank Committee in India

Friends, when the work in the government bank of India started increasing i.e. the load of work started increasing, in such a situation, the suggestion of small finance bank was given by the Usha Thorat Committee.

That is, the suggestion of small finance bank was given to rbi by the Usha Thorat committee itself so that the workload on government banks and co-operative financial institutions.

Some prerequisites for opening of small finance banks

Friends, no one can become a bank because for them RBI i.e. Reserve Bank of India has made some necessary criteria and rules.

  1. Any finance company and financial institution should have at least 10 years of experience of working in the banking sector i.e.
  2. The annual turnover of any finance company or financial institution to apply for small finance banks must be around Rs 100 crore
  3. Small finance banks can provide loans only to MSMEs and cottage industries and medium industries.
  4. Small finance banks can’t lend to big industries and big businessmen.
  5. Small finance banks can be restricted to a certain rural area or a certain city, they cannot be allowed to run their business in the area of any other bank.
  6. It is mandatory for all these financial institutions to have small finance banks next to their names so that people know about them.

What do small finance banks do?

  1. Friends, small finance banks act like ordinary banks.
  2. Opening a saving account and depositing cash and paying interest.
  3. Providing loans to small and medium farmers and motivating them to produce excessively
    to provide credit for the unorganised sector so that they too can expand as much as possible.
  4. To provide loans for domestic work and for small purposes so as to serve the purpose.
  5. To finance any person or any form i.e. to help them financially to achieve any expensive thing or any major objective.
  6. Saving account current account and fixed deposits for low-income people or for middle-class people.

Small Finance Bank VS Payment Bank – Difference Between Small Finance Bank and Payment Bank

A payments bank is a public limited company like a normal bank which is licensed by the RBI and it is used only for demand deposit and payment remittency service and they are very easy to use.

Small finance banks also provide credit and remittance services like ordinary banks, yet they do not fall under the category of ordinary banks because one of their jurisdictions is certain by the RBI that it can operate in this area only.

Along with opening a small finance bank account, you can also disburse a loan of up to Rs 25 lakh for the customer.

Small Finance Bank Interest Rate

From friends that we know that there are more than 6 government banks in our country which have a very high market capital but they give very low rate of interest or give less interest on deposits.

In such a situation, we often think that when they are not able to give, what will this small finance bank give, but it is not that small finance bank gives more % rate of interest than government banks.

Friends AU Small Finance Bank gives us an interest rate of up to 8.88% on our deposits in today’s time The main objective of Small Finance Bank is to increase the number of customers and increase the capital amount.

Is Small finance Banks Safe?

Friends, as you have read, a small finance bank is a small financial institution which is recognized by the Reserve Bank of India i.e. RBI.

They have been created to provide loans and financial assistance for the small needs of common citizens, in such a situation, opening an account and depositing the amount inside them is as informed as it is in a government bank.

In such a situation, there is no doubt that you can keep a large amount of money in the account of small finance bank up to about ₹5000000.

First small finance Bank in India

India’s first small finance bank is capital small finance bank, it was started in the month of March 2016 in Jalandhar city of Punjab.

Benefits of small finance Bank

  1. Friends, you can have the same savings account as a normal bank inside the Small Finance Bank,
    Current and current account, fixed deposit, and recurring deposits i.e. RD
  2. Friends Small Finance Bank gives a higher interest rate i.e. interest on deposits than any other bank like our government bank
  3. Friends, you can take a loan through small finance bank to expand any of your business and business.
  4. Through small finance bank, loans are given to all those small middle class farmers and industrialists to whom the government bank does not give loans.
  5. The main objective of these banks is to provide banking services to the rural and backward areas of India and to support the development of small and medium farmers by providing them financial assistance.
  6. Small finance banks open bank accounts in a very fast and very fast manner and a virtual debit card is provided to us by hand.
  7. We can easily enjoy net banking by using small finance bank account
  8. The biggest advantage of a small finance bank is that it is in a local area and its branches are found everywhere in our local area.
  9. All our problems inside the Small Finance Bank are solved very quickly.

Small Finance Bank Account Opening Eligibility

Friends as you know that in every single bank you prove your ability while opening an account, then it is very important to have some qualification to open your account inside the small finance bank.

  1. To open an account within a small finance bank, you must have citizenship of India or you must be a citizen of any one state of India.
  2. You must be at least 18 years of age to open an account within a small finance bank.
  3. To open your account inside the small finance bank, you must have the necessary documents like Aadhaar card, PAN card etc.
  4. Friends, if you want to enjoy net banking through small finance bank account then you need to have a mobile phone in your possession.

How to open an account in a small finance bank?

Friends, it is very easy to open your account inside small finance bank and you can open an account through your mobile or computer in a few minutes and their banking service is very easy.

  1. First of all, you have to install the official website of any small finance bank or its official Android app in your mobile.
  2. Now you open the mobile app of that small finance bank and in it you will see the option of saving account current account and other account.
  3. You have to choose the saving account from all those accounts and you will go ahead.
  4. Now you will reach a new page there will be the option of opening an account on which you have to click on it.
  5. Register with your number and get your verification done through OTP, you use the same number in it that you use daily.
  6. Now fill in your name, address, father name and some important details, you should fill in your necessary details by looking at one of your government documents.
  7. Now upload the photo of your necessary documents such as PAN card and Aadhaar card in it.
  8. Now after some time, a small finance bank will open a digital account, you can use it for net banking and for transactions.

But it is very important for you to go to the branch of the Small Finance Bank near you and get your KYC done.


Friends, so far you have known what is small finance bank, small finance bank kya hai, small finance bank functions, fees, interest rate, Small Finance Bank List in India 2022 Hindi, Small Finance Bank Charges and Fees, What are the benefits of Small Finance Bank?

Friends, I hope you have found it easier to understand about Small Finance Bank through this article and you have received important information. Share this article close to your friends and in your WhatsApp groups so that they also get this important information.

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