Group 7

Pratham Garg (PGP10221)

Jinesh Rambhia

Financial (PGP10225)
Vikalp Agrawal
(PGP10245)

Inclusion through Aarushi Kakirde

(PGP10002)

Small Finance
Soumya Hayaran
(PGP10115)
Srishti Singh (PGP10236)

Banks
2

Evolution of Small Finance Banks

▸ Many steps which were taken by the Government to decrease the issue of lack of financial
dearth in India
▸ A notable fraction of the country's population still didn’t have a chance to use various financial
services provided by other banks
▸ The Reserve Bank of India framed a committee in 2013 that proposed differential permitting
as Payment Banks and Small Finance Banks
▸ In 2014 the Reserve Bank stated rules for another type of banking element which was called,
'small finance banks
▸  In Sept 2015 RBI Issued licenses for SFB’s to 10 different financial institutions
▸ The major focus is to cater to the low-income category of the country and increase their
financial inclusion and help them to reap various benefits

Small Finance Banks are niche banks. These banks have licenses which provide basic services such as
deposits and lending. These banks aim to provide financial inclusion to sections of the economy which
are unable to get credits from other Scheduled Commercial Banks.
3

Initiation of Operations
Operations Begin
Jan – Suryoday, Utkarsh
Feb – Ujjivan
Mar – ESAF
Apr – AU
RBI’s in principle July – Fincare
approval Oct – North East

2015 2016 2017 2018

Operations Begin Operations Begin
Apr – Capital Mar - Jana
Sep - Equitas
4
Financial Inclusion
Why is it required ?
 Financial inclusion refers to providing
financial services to the unserved and
underserved people through various
financial instruments
 India has the 2nd largest population in the
world, and it brings it under the banking
umbrella is a humongous task in itself
 With the help of financial inclusion, the
economy can see an overall growth and help
in the upliftment of the poorer section
 One major reason is to provide credit at the
right rate and help in for a safe and secure
transaction and empower them to start a
business or have some savings etc.
Measures taken by SFBs..
 Plan for a higher level of penetration in
the rural as well as the semi-urban areas
with more number of banking outlets in
those areas to bring more and more
unbanked population in the formal
channel of banking with appropriate
banking options
 Extend the level of lending to the priority
sectors including agriculture, MSMEs,
education, housing, etc.
 Increase digital intervention to make
banking easier and accessible in remote
areas and people present there, tapping
more unbanked areas
5

Tracking Performance of SFBs

Profitability Balance Sheet Size

4
1

3
2
Geographic Product Portfolio
Penetration
6

Balance Sheet Size

▸ SFBs have been successful in

increasing the balance sheet size
over the years
▸ The graph shows the increment
in the sizes of balance sheets of
the SFBs over the years
▸ AU SFB has shown a significant
increase in its total size with Rs.
42,143.07 crore, maximum in 
FY20, being the largest SFB
▸ The smallest balance sheet is
Capital SFB with Rs. 5329 crore
in FY20
7
Product Portfolio Advances

 Any advances/loan issued by a small finance

bank is decided on the basis of the borrower’s
income, duration of the loan, loan amount, etc.
  It is based on the guidelines given by the
Reserve Bank of India
 The interest earned on the loan is the major
income source of any financial institution
 The main focus of SFB is on giving loans to
Micro, Small and Medium Enterprises
(MSMEs)
 The loan or advances provided by AU are the
highest in amount with a total of 29.6%,
followed by Equitas and Ujjivan with 16.8%
and 15.4% shares respectively
8 Deposit
Product Portfolio
s
 As compared to SCBs, the Small Finance
Bank’s Deposit accounts have a higher rate of
interest to lure the retail depositors
 From graph, AU has the highest amount of
deposits while Suryoday has the least in FY20

CASA Ratio

 CASA are non-term deposits accounts and are known

to have a lower interest rate as compared to term
deposits
 Higher CASA ratio indicates that a huge part of the
deposits that the bank has in current and savings
accounts when compared to the term deposits account
  It helps the bank to obtain money at a lower
cost
9 Third Party
Product Portfolio
Products

 The small finance banks also offer various third-party products like
Mutual Funds, Insurance & pension products
 However, these products do not form a significant part of the
income (about 10-12%) than the total income
 Their offerings demonstrate how SFBs provide offerings similar to
the universal banks and contribute to other key metrics of financial
inclusion
 These products also help these banks offer offerings to clients
identical to some major banks while operating in urban or
metropolitan cities
10

Geographic Penetration

 Geographic penetration is a type of Bank No. of No. of Geographic Geographic

Name ATMs Bank ATM Branch
Access indicator to measure financial Branches Penetration Penetration
inclusion. It exhibits the extent of the
AU 314 419 9.55 12.75
outreach of financial services
 The Table displays the data about the Capital 151 153 4.59 4.65
geographic penetration of ATMs and Equitas 322 867 9.8 26.37
Branches of India's different small ESAF 222 457 6.75 13.9
financial banks
Fincare 108 517 3.29 15.73
 The number of ATMs per 100000 km2
is calculated Jana 131 293 3.99 8.91
 As it is clearly visible that the number Suryoday 26 437 0.79 13.29
is very small for 100000 Km2 and Ujjivan 475 584 14.45 17.77
hence there lies a huge opportunity of
Utkarsh 177 518 5.38 15.76
growth for the SFBs
11

Geographic Penetration

 Depicts the rapid increase in the

Geographic Spread across States & UTs

operations of various small financial

banks of India.
 In June 2016, there were a total of 58
branches of all SFBs across all states. It
has grown to a whopping total of 4453
as on March 31st, 2020.
 The 10 institutions that were licensed to
form the SFBs together mark a large
area on the Indian map
 The greatest area is covered by Ujjivan
bank with 584 bank branches across
244 districts of 24 states and union
territories serving 3.7 Mn customers.
12

Geographic Penetration

 SFB' primary objective was to serve the Geographic Spread from Rural to
lower-income groups and mostly the Urban
rural and semi-urban areas.
 Most banks are active in the rural and
semi-urban areas. Capital SFB has the
highest penetration amongst others.
 Jana SFB has the least number of
branches operating in these areas,
focusing on low-income groups from
urban and metropolitan cities.
 In terms of region and segment of
customers, this diversification
demonstrates the role these banks are
playing in terms of financial inclusion.
13
Profitability
 Profitability is a major issue for any firm to run
in the industry and for SFBs to sustain in the
highly competitive market was a big task. But
they were able to do that fair enough
 The NIM is quite higher for SFBs as compared
to other types of banks because the interest rate
spread is generally higher for SFBs which is a
good sign for SFBs
 The minimum requirement of CAR for SFBs is
15% which is higher than that of universal
banks which is 9 %
 The average CAR is 24.08% which is quite
higher, the reason for the same might be
because of the equity infusion which is seen in
different SFBs from time to time
14
Conclusion
 Various rules and regulations that were imposed by the RBI and
SFBs have also faced stiff competition from different banks
 They are still able to sustain in the market and grow at a various
angle
 Also, the Geographical ATM and Branch penetration is a good sign
for financial inclusion
 We can see a lack of focus by SFBs in rural India which is in the
need for financial inclusion the most
 We are bit unsure about the data of the number of customers, as it
is not clearly stated that what percentage of the customers have
came under the banning umbrella for the first time
15

References

● https://dbie.rbi.org.in/DBIE/dbie.rbi?site=statistics
● https://www.aubank.in/
● https://www.ujjivansfb.in/
● https://www.janabank.com/
● http://equitasbank.com/
● https://www.capitalbank.co.in/
● https://www.esafbank.com/
● https://www.utkarsh.bank/
● https://www.suryodaybank.com/
● https://www.fincarebank.com/
● https://nesfb.com/
● https://www.investopedia.com/terms/c/current-account-savings-account.asp
16

THANK YOU..