The SFBs approached the banking regulator after holding a gathering in September the place they deliberated on points that have been constraining their enterprise, folks within the know mentioned. There was a consensus on the assembly on looking for doubling of the cap on mortgage dimension to ₹50 lakh, a financial institution government mentioned. The banking regulator had set the cap in 2014.
“Now we have (on the September assembly) additionally agreed to symbolize to the RBI to permit us to take part in co-lending,” the financial institution government mentioned.
The RBI in August 2025 relaxed the rules on co-lending, however SFBs, native space banks and regional rural banks proceed to be excluded from this.
Businesses
As per a current report by CareEdge Rankings, between fiscal years 2022 and 2025, SFBs recorded a 28% compound annual progress charge in deposits and a 25% CAGR in advances, considerably increased than the business averages of 12% and 16%, respectively.In June 2025, the RBI decreased the precedence sector lending (PSL) requirement for SFBs from 75% to 60% of their adjusted web financial institution credit score (ANBC) or credit score equal of off-balance sheet exposures (CEOBE)-whichever is increased. In keeping with the CareEdge Rankings report, “that is anticipated to expedite the diversification past the MFI (microfinance) section”.”SFBs have been arrange with the intention of selling monetary inclusion. Permitting co-lending and eradicating the portfolio cap will assist us to achieve a wider base and meet the calls for of the business, particularly the micro and small medium enterprises,” the financial institution government mentioned.
As per the CareEdge report, the share of MFI loans in SFBs declined from 35% in FY22 to 24% in FY25, with significant progress in MSME, automobile, housing and monetary establishments group and company loans.
The folks ET spoke with didn’t say precisely after they approached the central financial institution.
The RBI didn’t reply to a request despatched Wednesday for remark.
Some SFBs had earlier raised the problem that the descriptor, ‘Small Finance’, of their identify was inflicting many purchasers to equate them with co-operative banks and making them hesitant to deposit funds citing security considerations and requested to lift the problem once more with RBI. Nonetheless, the RBI in April turned down their request to drop the tag.
