Why small finance banks are gaining popularity among investors

– Small finance banks focus on providing financial services to underserved and unbanked segments.
– They cater to MSMEs, small traders, and rural customers.

What Are Small Finance Banks (SFBs)?

High Loan Growth: Focused lending to niche sectors results in robust growth.
Strong Margins: Higher yields from small-ticket loans drive profitability.

Key Factors Driving Popularity Among Investors

AU Small Finance Bank: Strong presence in vehicle and MSME financing.
Equitas Small Finance Bank: Focused on affordable housing and microloans.

Top Performing Small Finance Banks

Opportunities: Rapid financial inclusion and high credit demand in rural areas.
Challenges: Higher NPAs and dependence on small-ticket loans.

Opportunities and Challenges

– Rising penetration in rural and semi-urban areas ensures long-term growth.
– Digital transformation initiatives further enhance their efficiency and appeal.

Future Outlook for SFBs