No cost-of-fund benefit took the fizzle out of small finance banks

In the financial year 2017-18, SFBs posted a collective net loss of Rs 2,020 crore, against a net profit of Rs 140 crore the previous year, according to RBI data

In September 2015, when the Reserve Bank of India (RBI) gave licences to 10 out of the 72 applicants for setting up small finance banks (SFBs), turning into an SFB became the aspiration for thrifty credit institutions. Eight out of the 10 licences were given to microfinance institutions (MFIs).  Three years down the line, the euphoria around SFBs has fizzled out.

There are hardly any MFIs which now seek to turn into an SFB. In September 2018, the government gave an option to urban cooperative banks (UCBs) to turn into SFBs. However, so far, none of the UCBs has come