Abstract
The Reserve Bank of India (RBI) created Small Finance Banks (SFBs) in 2015 to encourage financial inclusion and offer banking services to underserved populations. Small business units, micro- and small businesses, farmers, and low-income households are just a few examples of the unbanked and underbanked groups of the population that SFBs primarily target with basic banking services. SFBs are nevertheless vulnerable to non-performing assets (NPAs), which can arise for a number of causes, just like other banks. SFBs use a variety of strategies, such as effective credit appraisal and monitoring, quick recovery actions, loan restructuring, and legal action against defaulters, to manage and reduce their NPA levels. To maintain compliance with prudential norms and protect stability, the RBI supervises and conducts routine inspections of SFBs.
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