Small Finance Bank is registered as Public Limited Company under Companies Act, 2013 and will be Licensed as section 22 of the Banking Regulation Act, and governed by the provisions of Banking and Regulation act, 1949 and Reserve Bank of India Act, 1934 and according to other relevant statute or guidelines issued by RBI and other regulators from time to time.

Small Finance Bank License is a type of niche bank. By obtaining this licens these banks provides basic banking services related to acceptance of deposits and lending. Their main aim is to provide banking services to those sections of economy which are not being served by other banks, such as small business units, small and marginal farmers, micro and small industries and entities of unorganized sector.

Small Finance Banks make money by collecting money from current account and saving account depositors, fixed depositors, commercial papers, wholesale deposits, refinancing etc. interest rates on savings account is between 5 to 6 percent, and on fixed deposit around 9 percent interest is offered.

Small Finance Banks are required to take prior approval of RBI before opening of the Branches. Where universal banks are not required to take permission to role out a branch in the unbanked rural areas.

Its primary purpose is to provide institutional mechanism for promoting rural and semi urban savings to the people of rural areas. Supply of credits to small business units, small and marginal farmers, micro and small industries, and other unorganized sector entity, through high technology- low cost operations.

• Small Finance Bank will undertake basic banking services of acceptance of deposits and lending to unsaved and undeserved sections.

• It will provide banking facilities to boost saving habits.

• It will mainly target small businesses unit, marginal farmers, and unorganized sector entities through high technology-low cost operations.

• They are established as a public limited company in the private sector which is promoted either by individuals, corporate, trust or societies.

• They are governed by provisions of reserve bank of india act, 1934, banking Regulation Act, 1949 and other relevant statutes.

• Small finance banks are considered as non-scheduled banks and they are not allowed to borrow funds from RBI like other scheduled banks.