RBI approval: The Reserve Bank of India (RBI) has granted in-principle approval to Fino Payments Bank Limited (FPBL) to convert into a Small Finance Bank (SFB). This significant step allows Fino to expand its services beyond the limitations of a payments bank and marks a major milestone in its growth and financial inclusion journey.
What Does RBI’s Approval Mean ?
Fino Payments Bank has been operating under the payments bank model, which restricts deposit limits and prohibits lending. With RBI’s nod for conversion into a Small Finance Bank, Fino can now offer a full range of banking services, including loans, higher deposit accounts, and credit products. The transition allows the bank to move from a restricted payments-bank setup to a full-service financial institution, serving a broader range of customers, especially in rural and underserved areas.
Industry experts see this as a crucial step for Fino, given its strong rural presence, technology-driven operations, and scale. By becoming a Small Finance Bank, Fino can now strengthen customer relationships, enter retail and MSME lending, and significantly enhance its financial inclusion footprint.
How RBI Evaluates Conversion Requests
The approval comes under RBI’s “on-tap” licensing guidelines for Small Finance Banks. According to these rules:
- Only payments banks controlled by Indian residents
- Banks that have successfully operated for at least five years
can apply for conversion into SFBs. FPBL’s application was carefully assessed under this framework, and the in-principle approval is the first step. The bank will still need to meet additional regulatory requirements before receiving the final SFB licence.
What is a Small Finance Bank ?
Small Finance Banks are designed to promote financial inclusion by focusing on small businesses, farmers, unorganised-sector workers, and low-income households. Unlike payments banks, SFBs can:
- Offer loans across retail, MSME, and agriculture sectors
- Accept all types of deposits without restrictions
- Provide credit cards, micro-loans, and other credit products
- Operate as full-service banks while prioritising inclusion-led sectors
SFBs are also required to maintain priority-sector lending ratios, ensuring credit reaches underserved communities.
How Will Customers Benefit ?
Once Fino completes the transition, customers can expect several benefits:
- Access to loans for the first time, including personal, business, and agriculture loans
- Ability to maintain higher deposit balances
- Comprehensive banking services through Fino’s extensive network
- Enhanced technology-based banking tools for easier transactions
Until the conversion is finalized, Fino will continue operations under its existing payments-bank licence.
The move to Small Finance Bank status marks a new chapter for Fino, promising more financial products and services to millions of customers across India.
