Expansion Pathway
Fino Payments Bank Transition Towards Small Finance Banking: Fino Payments Bank has received an in-principle nod from the Reserve Bank of India (RBI) to transition into a Small Finance Bank (SFB). This approval marks the first such instance for any payments bank in India. Announced on 5 December 2025, the development provides Fino with the regulatory green signal to expand into full-scale banking.
Static GK fact: RBI was established in 1935 as India’s central banking authority.
Understanding Payments Banks
Payments banks were created to enhance financial inclusion among low-income households and informal sector workers. These banks, however, face strict limitations. They cannot offer loans, cannot hold deposits beyond ₹2 lakh per customer, and cannot engage in foreign exchange operations. Their role is restricted to services like digital payments, fund transfers, ATM facilities, and mobile banking.
Static GK fact: The payments bank model was recommended by the Nachiket Mor Committee in 2013.
Role of Small Finance Banks
Small Finance Banks offer a wider suite of banking services, including lending and unrestricted deposit collection. They cater to underserved groups such as small farmers, micro industries, and informal sector entities. SFBs must also dedicate 25% of their branches to unbanked rural areas to strengthen financial access. Static GK Tip: India’s first Small Finance Bank was Capital Small Finance Bank, launched in 2016.
Eligibility Path for Fino
The approval is based on RBI’s on-tap licensing guidelines that allow payments banks to convert into SFBs after completing five years of operations. Fino, operational since 2017, fulfilled this condition. The bank also met criteria related to Indian ownership, governance strength, and regulatory compliance. This transition marks RBI’s confidence in Fino’s stability and operational discipline.
Significance of the Transition
The new status will unlock significant opportunities for Fino. Removal of the deposit cap enables it to attract larger savings portfolios. The ability to lend—a major limitation under the payments bank model—will help the bank compete with mainstream banking institutions. The shift will also promote deeper credit penetration in rural and underserved regions.
Static GK fact: Rural India accounts for nearly 65% of the country’s population, making financial outreach crucial for inclusion policies.
Strategic Outlook for Fino
As an SFB, Fino can diversify income sources, build a stronger branch footprint, and expand digital capabilities. A requirement to allocate 25% of branches in rural areas will strengthen its presence across underbanked regions. Enhanced lending abilities and broader customer access are expected to contribute to long-term growth. This approval sets a benchmark for other payments banks considering similar transitions.
Static Usthadian Current Affairs Table
Fino Payments Bank Transition Towards Small Finance Banking:
| Topic | Detail |
| Bank | Fino Payments Bank |
| Approval | In-principle RBI nod for SFB conversion |
| Announcement date | 5 December 2025 |
| Operations began | 2017 |
| Deposit limit earlier | ₹2 lakh per customer |
| SFB licence rule | Minimum 5 years of operations |
| Licensing type | On-tap SFB licensing guidelines |
| SFB rural mandate | 25% branches in unbanked rural areas |
| Payments bank restrictions | No lending, no large deposits, no forex |
| Purpose of transition | Expand services and offer full banking facilities |
