Advances of small finance banks (SFBs) are expected to cross ₹2 lakh crore this financial year, according to a report by a leading ratings agency.
The uptick of at least 16 per cent growth will be driven by continued expansion in the non-microfinance segments, says ratings agency, Crisil, adding that a calibrated recovery of the microfinance loan book will also help push the small finance banks’ growth in advances.
Segmental diversification, which has been a long-running growth theme for the SFBs, most of which were microfinance institutions (MFI) at the time of conversion, will continue this fiscal as well, it added.
Diversification to other segments may be the focus now, the report said, an act aimed at minimising asset quality concerns.
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The report said diversification is crucial as the RBI guidelines mandate thresholds of 3 per cent and 1 per cent 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 per cent 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 per cent 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.
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