The Role and Impact of Small Finance Banks in Financial Inclusion

Abstract

Small Finance Banks (SFBs) were introduced in India in 2015 by the Reserve Bank of India (RBI) to promote financial inclusion and provide banking services to underserved and unserved populations. This paper examines the role of SFBs in enhancing financial inclusion in India, their operational challenges, and their impact on the economy. Using secondary data from RBI reports, financial statements, and case studies of prominent SFBs, the study evaluates the performance of SFBs in India. The findings indicate that SFBs have significantly contributed to financial inclusion, particularly in rural areas, but face challenges such as high operational costs and regulatory compliance. Policy recommendations are provided to address these challenges and ensure sustainable growth.