A rethink on priority sector norms for SFBs can be helpful: ASFBI CEO

Nearly a decade ago, the Reserve Bank of India (RBI) licensed 10 small finance banks (SFBs) to bolster financial inclusion. The Report on Trend and Progress of Banking in India (FY23) notes that some microfinance institutions among SFBs earlier retained their business models. Consequently, the share of unsecured lending in their portfolios, especially to microfinance and joint liability group borrowers, is high. Lack of asset diversification is also often coupled with geographical concentration, implying significant risk. A comprehensive review of the regulatory capital framework for SFBs is under consideration. A few SFBs also want a relook at the license condition