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

By Shivank Goel|Updated : August 19th, 2022

The difference between a small finance bank and a commercial is mentioned here. Small finance banks target customers: small business people, farmers, unorganized employees, medium corporations, and small micro-enterprises. On the other hand, commercial banks do not have limitations on the customers they benefit.

  • Another difference between both the 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.
  • The main similarity between the 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, 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.

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FAQs

  • The difference between a small finance bank and a commercial based on the customers they serve is Small finance banks have target customers who are small businessmen, farmers, etc. Whereas commercial banks do not have restrictions on the consumers, they benefit.

  • Small finance banks are identical to commercial banks as both are regulated by RBI and provide allowance benefits plus digital banking resolutions. But, they differ in the loan criteria, their target customers, capital limit, etc.

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