Small can be more beautiful: Biz model of SFBs may need to be tweaked

SFBs have been around for nearly five years now, but no study has yet mapped their story so far

The Reserve Bank of India’s (RBI’s) Report on the Trend and Progress of Banking in India 2020-21 (T&P: 2020-21) says that the primary cash-flows of small finance banks (SFBs) took a hit during the first phase of the pandemic, and that even earlier, structural problems had beset the sector.

Many of these banks have concentration risk on both sides of their balance sheets. On the liabilities side, they have low savings and current accounts, and rely heavily on bulk deposits and term-deposits from co-operative banks. On the assets side, the share of unsecured microfinance loans is disproportionately large. From the