Non-banking financial institutions (NBFCs) and small finance banks (SFBs) are an important source of the Indian financial system. The Non-banking financial institutions and Small Finance banks both offer financial services, there is a stark contrast between their structure, functions, and regulatory environment. In this article, we are giving in-depth explanations of NBFCs and SFBs to give you an understanding of their roles and operational variations.
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956, or the Companies Act, 2013, which carries on financial business like lending, investments, leasing, hire-purchase, insurance, or chit funds. They are governed by the Reserve Bank of India (RBI) as per the RBI Act, 1934.
A Small Finance Bank (SFB) is a specialised bank licensed by the RBI to offer basic banking services with emphasis on financial inclusion for unbanked and underserved sections. SFBs were launched in 2015 to fill the gap in rural and semi-urban regions with deposit and lending services. SFBs are governed by the Banking Regulation Act, 1949, and are subject to more stringent regulations compared to NBFCs.
| Parameter | NBFC | Small Finance Bank |
| Definition | Non-banking entity providing financial services without a banking license. | Licensed bank focusing on financial inclusion with basic banking services. |
| Regulation | Regulated by the RBI under the RBI Act, 1934; less stringent norms. | Regulated by the RBI under the Banking Regulation Act, 194, stricter norms. |
| Banking License | No banking license; cannot accept demand deposits. | Holds a banking license; can accept demand and time deposits. |
| Services | Loans, leasing, hire-purchase, investments and microfinance. | Savings/current accounts, loans, fixed deposits, basic banking. |
| Deposits | Can accept fixed deposits (if permitted); no demand deposits. | Accepts both demand (savings/current) and time deposits. |
| CRR/SLR Compliance | Not required to maintain CRR or SLR. | Must maintain CRR (4%) and SLR (18%) as per RBI norms. |
| Target Audience | Small businesses, retail customers, niche markets. | Unbanked, underbanked, low-income groups and small enterprises. |
| Capital Requirements | Lower capital requirements (minimum ₹2 crore for some NBFCs). | Higher capital requirements (minimum ₹200 crore). |
| Payment Systems | Cannot issue chequebooks or participate in payment systems. | Can issue chequebooks and participate in payment systems like NEFT/RTGS. |
| Priority Sector Lending | Not mandatory, though some NBFCs voluntarily lend to priority sectors. | Mandatory 75% of Adjusted Net Bank Credit to priority sectors. |
Join our exclusive Telegram group where our experts are ready to answer all your queries, guide you in banking exam preparation, and give personalised tips to boost your success. Get access to real-time solutions, expert advice, and valuable resources to improve your study journey. [Click here to join now!]
| IBPS RRB PO Free Mock Test | IBPS PO Free Mock Test |
| SBI PO Free Mock Test | IBPS SO Free Mock Test |
| IBPS RRB Clerk Free Mock Test | IBPS Clerk Free Mock Test |
No, only banks (including SFBs) can issue credit cards, though NBFCs can issue co-branded cards through partnerships.
Yes, deposits are insured up to ₹5 lakh under the Deposit Insurance and Credit Guarantee Corporation (DICGC).
No, NBFCs cannot open savings or current accounts.
SBI CBO Interview Call Letter 2026 is out at ibps.in. Check the direct download link,…
Read the latest current affairs today for banking, SSC & govt exams. Stay updated with…
LIC HFL Junior Assistant Result 2026 released. Check merit list PDF, score card, result link,…
RRB Group D Exam Date 2026 announced. Check CBT schedule, admit card date, city intimation…
Learn the SBI PO Question-Skipping Strategy, take a free quiz, download PDF, and improve accuracy,…
SBI PO Salary 2026 starts with a basic pay of ₹56,480 along with attractive allowances…
Thousands of aspirants have cleared exams using PracticeMock’s exam-level mock tests.