The Reserve Bank of India (RBI) has issued in-principle approval to Fino Payments Bank Limited (FPBL) to transition into a Small Finance Bank (SFB), marking a pivotal step for the digital-first lender focused on underserved markets. This nod aligns with RBI’s on-tap licensing guidelines, which qualify resident-controlled payments banks with over five years of operations for such upgrades. FPBL, operational since June 2017 and public since its 2021 IPO, applied in late 2023, positioning it as India’s first payments bank to secure this opportunity.
This shift enables FPBL to diversify from deposit and payment services into full-fledged lending, focusing on microloans, credit products, and underserved rural and low-income segments. The bank must now fulfill RBI’s requirements on capital adequacy, governance, technology infrastructure, and business restructuring within 18 months to secure the final license. FPBL’s asset-light model, powered by robust digital platforms and an extensive agent network, positions it well for profitability through higher-margin lending activities.
Management views this as validation of its commitment to financial inclusion and regulatory compliance. MD & CEO Rishi Gupta highlighted the bank’s technology-driven approach and seamless customer migration plans during the transition. Analysts project improved returns, with return on equity potentially climbing to 17% by FY28, fueled by diversified revenue and cost efficiencies amid India’s booming digital payments landscape.
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The approval underscores RBI’s push to evolve payments banks into comprehensive financial service providers, enhancing credit access for millions in unbanked areas. FPBL aims to leverage its distribution strengths to compete effectively in the SFB space while maintaining service continuity.
