What is the difference between microfinance and small finance bank?

While it may look like small finance banks will focus on the same kind of customers as MFIs, there is a difference in terms of lending practices. With micro-finance lenders, at present the interest rate is 24-26\% per annum on loan products. Small finance banks can take deposits.

What is the difference between microfinance and a bank?

A microfinance institution offer loans with little to no asset to the clients while in a bank one has to have collateral to receive a loan.

What small finance bank Cannot do?

CAN’T DO: Not allowed to set up subsidiaries to undertake non-banking financial activities. Other financial and non-financial services activities of the promoters should not be mingled with the working of the bank.

What is the difference between microfinance and micro credit?

Microcredit is the small loan facility provided to the people with less earning, to motivate them to become self-employed. Microfinance refers to the number of financial services provided to the small entrepreneurs and enterprises who cannot take shelter of banks for banking and other services.

What are the functions of small finance bank?

Functions of SFBs: Accept small deposits and disburse loans. Distribute mutual funds, insurance products and other simple third-party financial products. Lend 75\% of their total adjusted net bank credit to priority sector. Maximum loan size would be 10\% of capital funds to single borrower, 15\% to a group.

How does a microfinance bank work?

Microfinance banking is the provision of a broad range of financial services such as deposits, loans, money transfers and insurance to the poor and low income household and their micro enterprises at affordable cost.

How are small finance banks different?

The other difference between small finance banks and commercial banks is Commercial banks can open their branches anywhere whereas the small finance banks have to open 25\% of their branches in rural areas, in the initial 3 years. Types of Banks in India – Category and Functions of Banks in India.