Advances of Small Finance Banks Expected to Cross ₹ 2 Lakh Cr This Fiscal: Report

Advances of small finance banks (SFBs) are expected to cross ₹ 2 lakh crore this financial year, registering a growth of at least 16 %, according to a report.

In the report, ratings agency Crisil said the uptick will be driven by continued expansion in the non-microfinance segments, coupled with calibrated recovery of the microfinance loan book, which had seen degrowth in the last financial year.

Segmental diversification has been a long-running growth theme for the SFBs, most of which were microfinance institutions (MFI) at the time of conversion, it said.

This approach will continue this fiscal as well, persuading a sharper focus on diversification to other segments to minimise asset quality concerns, it added.

The report said diversification is crucial as the RBI guidelines mandate thresholds of 3 % and 1 % for gross and net non-performing assets (NPAs), respectively, for the SFB to seek a universal banking license.

The share of non-microfinance loans in SFB advances has already touched 67 % as of March 2025. Among the non-microfinance loans are mortgage advances, vehicle loans and MSME advances, it said.

The share of retail deposits in the overall SFB deposits has remained above 70 % since the interest rates started to rise. However, its composition has moderately shifted towards term deposits, Crisil said.

There are 10 SFBs at present in India, as the AU Small Finance Bank is transitioning to a universal bank.