Small Finance Bank Licences: Not the End of the Road for Non-SFB MFIs

by Akhilesh Singh, Lokesh Singh and Nikunj Gor
Nov 27, 2015
1 min

MFIs that are not small finance banks can also find ways to increase their market share.This note discusses all these aspects in detail.

Eight NBFC-MFIs received ‘in-principle’approval from RBI to set up SFBs. However, a few big NBFC MFIs missed out or did not apply for SFB license. Once transformed SFBs will enjoy better legal identity, access to public deposits and capacity to expand varied market segment. However, it may be not the end of the road for non-SFB MFIs. The transformation phase of SFBs likely to provide short to medium term advantage to non SFB MFIs. SBFs may face challenges in producing majestic growth numbers as funding under priority sector lending and managed loan portfolio will dry up gradually. This will be time for Non-SFB MFIs to strengthen operational processes and develop robust control structures to increase their competitive advantage. Non-SFB MFIs can also find ways to increase their market share, some may – Expand through strategic tie-ups, take up segments/geographies that SFBs may vacate and expanding off balance sheet portfolio. This note discus all these aspects in details.