What is the Difference Between a Small Finance Bank and a Commercial Bank?

By BYJU'S Exam Prep

Updated on: November 9th, 2023

The difference between small finance bank and commercial bank is that Small finance banks target customerswhereas commercial banks do not have limitations on the customers they benefit from. The customers of Small finance banks include small business people, farmers, unorganized employees, medium corporations, and small micro-enterprises. The main similarity between small finance banks and commercial banks is that their responsibility is to give loans and is handled by the RBI.

Difference between Small Finance Bank and Commercial Bank

Understand the significant differences between a small finance bank and a commercial bank table-wise based on the loan type, target customers, and capital limit.

Small Finance Bank Commercial Bank
They offer primary loan facilities such as a vehicle, personal, gold, etc. They provide all types of loans.
Their target customers are small borrowers, unorganized workers, and the Ministry of Micro, Small & Medium Enterprises. Their target customers are not specified to any one category or entity.
Minimum funds should be up to 100 crores. They have no capital limit and require enormous amounts of money.

Small Finance Bank vs Commercial Bank

Another difference between both banks is Small Finance Banks, in the initial 3 years, need to open 25% of their units in rural areas.

  • Commercial banks can establish their branches at any place.
  • Small finance banks must provide a 75% share of the loans to the priority sector.

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