Best Small Finance Bank In India
Chahat Awasthi,Armaan Joshi
Contributor,Editor
Editorial Note: This content has been independently collected by the Forbes Advisor team and is offered on a non-advised basis. This content is not part of the comparison service provided by RunPath Regulatory Services. Forbes Advisor may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations.
Small finance banks have gained popularity, thanks to higher interest rates offered. However, there are fears surrounding the safety of the money deposited. Below, we give a low down on all things small finance banks in India – from what these banks are, how they are regulated, how to know if they are safe, how to open an account with them and the benefits of investing with these banks.
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- Featured Partners
- Best Small Finance Bank in India
- Best Small Finance Bank
- Suryoday Small Finance Bank Limited
- Ujjivan Small Finance Bank Limited
- Equitas Small Finance Bank Limited
- Fincare Small Finance Bank Limited* (now merged with AU)
- AU Small Finance Bank Limited* (now merged with Fincare)
- Summary of Top Small Finance Bank in India
- What are Small Finance Banks?
- Benefits of Investing in Small Finance Bank
- Documents Required to Open a Small Finance Bank Account
- Factors to Consider Before Investing in Small Finance Bank
- How to Open a Small Finance Bank Account
- Featured Partners
- Bottom Line
Featured Partners
1
AU Bank Savings A/C
Interest rate:
Upto 7.25%
Balance required:
INR 2,000 onwards
Special feature:
Monthly interest payouts
On AU Bank’s secure website
2
Yes Bank Savings Account
Interest rate:
Upto 6.25%
Balance required:
Zero
Special feature:
Earn up to 16000 Yes Bank Rewardz Points worth 4000 INR
On Yes bank’s secure websie
3
Kotak 811 Zero Balance Savings Account
Interest rate:
Upto 7% p.a. with ActivMoney
Balance required:
Zero
Special feature:
Zero-contact, Video KYC Savings Account
On Kotak’s secure website
Best Small Finance Bank in India
- Suryoday Small Finance Bank Limited – Best CRAR on the list
- Ujjivan Small Finance Bank Limited – Best in Deposits CAGR
- Equitas Small Finance Bank Limited – Best in CASA Ratio
- Fincare Small Finance Bank Limited – All-India SFB with a Diversified Portfolio
- AU Small Finance Bank Limited* – All-India SFB with Diversified Portfolio
Best Small Finance Bank
AU and Fincare have now merged on Oct. 29, 2023 to create an all-India small finance bank with a diversified portfolio.
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Best CRAR in the list
Suryoday Small Finance Bank Limited
4.8
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Capital Adequacy Ratio (CRAR)
33.7%
Deposits CAGR (FY21-23)
25%
Capital Adequacy Ratio (CRAR)
33.7%
Deposits CAGR (FY21-23)
25%
Why We Picked It
With an enviable CASA ratio, and decent deposits compounded annual growth rate, Suryoday offers a safe banking experience for its customers. It is the ratio of deposits in current and savings accounts to the total deposits. The higher the ratio, the lower the cost of funds. It also tells that a bank has higher liquidity.
The bank is also considered a strong contender when it comes to micro loans for Joint Liability Groups. It also offers an overdraft facility of up to INR 10,000. The bank also lends to individual households.
Book Loan (deposits to net advances): 85.9%
Casa to total deposits: 17.1%
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Best in Deposits CAGR
Ujjivan Small Finance Bank Limited
4.5
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Capital Adequacy Ratio (CRAR)
25.8%
Deposits CAGR (FY21-23)
40%
Capital Adequacy Ratio (CRAR)
25.8%
Deposits CAGR (FY21-23)
40%
Why We Picked It
Ujjivan does not just have a good CAGR in terms of deposits, it also is a strong lender when it comes to micro loans for Joint Liability Groups. The bank can lend up to INR 2 lakh to these groups.
When it comes to personal banking, the classic savings account offers an interest rate of up to 7.50%. The individual also gets a free cash deposit limit of INR 3.5 lakh per month. Per quarter, 10 free cheque leaves are available. It also boasts state-of-the-art mobile banking in nine languages.
Book Loan (deposits to net advances): 120%
Casa to total deposits: 26.4%
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Best in CASA Ratio
Equitas Small Finance Bank Limited
4.5
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Capital Adequacy Ratio (CRAR)
23.8%
Deposits CAGR (FY21-23)
24%
Capital Adequacy Ratio (CRAR)
23.8%
Deposits CAGR (FY21-23)
24%
Why We Picked It
For personal banking users, the bank offers a 7% interest rate. For a balance above INR 5 lakh but up to INR 50 cr, the interest rate is 7.50% per annum. It also gives a hearty choice of savings account options. FD interest rates go up to 9% yearly.
It provides micro-loans to individual households. The turnaround time for processing these loans is up to 14 days. The bank has its business correspondents in Odisha, Bihar and Uttar Pradesh.
Book Loan (deposits to net advances): 98.4%
Casa to total deposits: 42.3%
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All-India SFB with diversified portfolio
Fincare Small Finance Bank Limited* (now merged with AU)
4.5
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Capital Adequacy Ratio (CRAR)
23%
Deposits CAGR (FY21-23)
23%
Capital Adequacy Ratio (CRAR)
23%
Deposits CAGR (FY21-23)
23%
Why We Picked It
Not only does the bank show solid ratios related to the safety and liquidity of its funds, but it also offers interest rates of up to 7.50% per annum on its savings accounts. The FD rate goes up to 9.21% – for senior citizens with effect from October 28, 2023.
Channels of banking include branch and ATM, WhatsApp banking, mobile banking, internet banking and chat banking. It also offers several types of savings accounts to cater to the specific needs of people. Its business correspondent outlets are in Andhra Pradesh, Bihar, Jharkhand, Kerala and Telangana.
The bank also plans to have new branches in Chhattisgarh, Karnataka, Maharashtra, Telangana and Uttar Pradesh.
Book Loan (deposits to net advances): 99.5%
Casa to total deposits: 33.1%
FEATURED PARTNER OFFER
All-India SFB with diversified portfolio
AU Small Finance Bank Limited* (now merged with Fincare)
4.5
Our ratings take into account a product's rewards, fees, rates and other category-specific attributes. All ratings are determined solely by our editorial team.
Capital Adequacy Ratio (CRAR)
26.6%
Deposits CAGR (FY21-23)
39%
On AU Bank's secure website
Capital Adequacy Ratio (CRAR)
26.6%
Deposits CAGR (FY21-23)
39%
Why We Picked It
The bank offers a high-interest rate of about 7.25% per annum, with monthly payouts. It’s easy to open an account with the bank and can be done in three ways – by video banking, by visiting a branch, and by calling customer care. The digital account offers free ATM declines in case of insufficient funds. Additionally, debit card transactions at any ATM are free.
There are several other facilities such as transfers with NEFT, IMPS, and RTGS are free and unlimited. The bank also has its own Business Correspondents channels that help customers with banking activities.
Book Loan (deposits to net advances): 118.7%
CASA to total deposits: 38.4%
Read More: AU Digital Savings Account
Summary of Top Small Finance Bank in India
| Small Finance Bank | Company – Logo | FORBES ADVISOR RATING | Forbes Advisor Rating | Gross NPA ratio | Net NPA ratio | Provision Coverage Ratio | Learn More CTA text | Learn more CTA below text | LEARN MORE |
|---|---|---|---|---|---|---|---|---|---|
| Suryoday |  | 4.8 |  | 3.13% | 1.55% | 52% | View More | ||
| Ujjivan |  | 4.6 | | 2.88% | 0.04% | 98% | View More | ||
| Equitas |  | 4.5 |  | 2.76% | 1.21% | 57% | View More | ||
| Fincare* (merged with AU) |  | 4.5 |  | 3.25% | 1.30% | 92% | View More | ||
| AU* (merged with Fincare) |  | 4.5 | | 1.66% | 0.42% | 75% | Apply Now | On AU Bank’s secure website |
Source: Crisil MI & A
What are Small Finance Banks?
Created by the Reserve Bank of India (RBI), small financial banks are specialized banks that enable and extend basic banking functions to unbanked individuals, agriculturists, micro and small industries, unorganized entities, and smaller businesses.
The RBI has categorized these banks as scheduled banks and regulates them directly.
Benefits of Investing in Small Finance Bank
Small finance banks usually give higher interest rates than on savings accounts and fixed deposits compared with their traditional counterparts. The good ones also provide customized credit products to their customers to cater to specific needs. Additionally, these not only have lower minimum balance requirements but also provide doorstep banking services. Not to mention most small financial banks are focused on financial inclusion.
Documents Required to Open a Small Finance Bank Account
Generally, most small finance banks need a duly filled application form. Identity proof such as voter ID or passport, photographs, and address proof such as an Aadhaar card, telephone bill, passport, etc.
Factors to Consider Before Investing in Small Finance Bank
One must look at some or all of these eight to nine parameters to see if a bank is worth investing in. These include gross NPA ratio, net NPA ratio, provision coverage ratio, leverage ratio, capital adequacy ratio, casa ratio, liquidity coverage ratio and net stable funding ratio. It’s also important to note if the advances are greater than the deposits for a bank.
How to Open a Small Finance Bank Account
A savings account in a bank like AU can be opened online. It lends interest at the rate of 7.25% per annum with a monthly payout. To open the account, keep PAN card and Aadhaar details handy, fill in personal details into the online form, fund your account and voila! Happy banking.
Other than video banking, AU also gives the option of visiting your nearest branch or calling customer care to open a savings bank account.
Featured Partners
1
AU Bank Savings A/C
Interest rate:
Upto 7.25%
Balance required:
INR 2,000 onwards
Special feature:
Monthly interest payouts
On AU Bank’s secure website
2
Yes Bank Savings Account
Interest rate:
Upto 6.25%
Balance required:
Zero
Special feature:
Earn up to 16000 Yes Bank Rewardz Points worth 4000 INR
On Yes bank’s secure websie
3
Kotak 811 Zero Balance Savings Account
Interest rate:
Upto 7% p.a. with ActivMoney
Balance required:
Zero
Special feature:
Zero-contact, Video KYC Savings Account
On Kotak’s secure website
Bottom Line
These banks provide good interest rates and supportive loans and the top banks have a good safety quotient. Besides, of late, the Reserve Bank of India has recently given authorized dealer category – I license to AU and Equitas. This move will now allow these banks to deal in forex. This might lead to the entry of foreign customers into the landscape.
It’s important to note how much a bank lends, what’s the quality of the lending, what was leverage used, what its collection effort looks like, are the deposits lower than the advances, how much of the owners’ money is invested in the bank and so on.
Forbes Advisor adheres to strict editorial integrity standards. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. The opinions expressed are the author’s alone and have not been provided, approved, or otherwise endorsed by our partners.
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Which is the safest small finance bank in India?
The safety of small finance banks depends on several factors: capital adequacy ratio, net stable funding ratio, liquidity coverage ratio, CASA ratio, gross NPA ratio/net NPA ratio, provision coverage ratio and leverage ratio. While the last three factors should be as low as possible, the first four should be as high as possible for a bank to be safe.
The banks mentioned in the table above score well on most of these factors and also overall on each of the factors – Suryoday, Ujjivan, Equitas, Fincare, and AU.
Which is the fastest-growing small finance bank in India?
In the second quarter of the Financial Year 2023, Equitas Small Finance Bank Limited saw a 37% increase in advances to INR 31,231 cr. Its deposits rose 42% to INR 30,839 cr. Ujjivan also saw a double-digit year-on-year growth. It recorded a 27% growth in advances to INR 26,600 cr from INR 20,938 cr in the year-ago period.
Which small finance bank has the best interest rate?
Of the list shared, Fincare Small Finance Bank Limited is one of the small finance banks that has a high interest rate.
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