Small Finance Banks: A Paradigm Shift in Microfinance Fostering Financial Inclusion in India

  • Poonam Rathi, Amit Rathi, Manvinder Singh Pahwa


India is the lower middle-income fast-growing economies of world having a vision to become a USD 5 trillion economy by 2025 with a sustainable and equitable growth.  Financial Inclusion is an important driver of this journey accelerating the economic development of the nation by bringing the unbanked and underbanked population within the framework of financial services. In recent times, it is been perceived as a tool to alleviate poverty, foster equitable distribution of wealth and human development. Hence, this necessitates a more meaningful and responsible financial inclusion approach which empowers the missing loop-poor, adult and women to contribute towards an inclusive economic growth. In the wake of attaining universal financial inclusion, Government of India (GoI) is consistently taking new initiatives to make financial services accessible to the last mile financially deprived population. To foster the roots of financial inclusion to unbanked people, small micro and medium business, low income households and unorganized sectors, GOI introduced new banking model–Small Finance Bank. It’s a niche bank established with the objective of serving the financially excluded weaker section and vulnerable ones with the most suitable technology driven cost-effective model served by formalised financial institutions in a timely, transparent and secured manner. This paper delineates the emergence of Small Finance Bank and its performance.

 Keywords: Financial Inclusion, Small Finance Bank, Underserved and Unbanked Population, Microfinance.