THE HEADWINDS

Transitioning from asset-only outfits to also dealing with liabilities

Their traditional microfinance clients have been net borrowers and not net savers. Will need to replace bank loans with deposits as a source of funds. Therefore, will need bulk deposits and clients such as large corporates that have not traditionally transacted with them

Unlike scheduled commercial banks, 75 per cent of a small finance bank portfolio has to be priority sector lending (40 per cent for commercial banks). Also, half the portfolio has to comprise loans of less than ` 25 lakh.

Will be more exposed to the informal sector

Growing competition from full-scale banks that are expanding at a fast pace

Competition from Bandhan Bank.

RBI’s intent to grant full-scale banking licences to urban cooperative banks.