Top Small Finance Bank Stocks in India
(The stocks mentioned in the blog are as per Analyst Ratings and Market Capitalization)
Small Finance Banks are financial institutions that mostly provide banking services to rural and semi-urban regions. They operate as public limited companies under the Companies Act, 2013. These banks offer basic banking services, including accepting deposits and providing loans, especially targeting underserved segments such as small businesses, micro and small industries, small and marginal farmers and unorganised sector entities.
According to a report, deposits made with Small Finance Banks (SFBs) in India showed sustainable growth, expanding at a CAGR of 32% from 2020 to 2023.
Small Finance Bank Industry in India - A Brief Overview
The Reserve Bank of India (RBI) established small finance banks as a specialised banking segment to strengthen the Indian economy and promote financial inclusion. The RBI issued guidelines for SFBs in November 2014, shortly after the announcement of the Union Budget for 2014-15.
These banks focus on providing basic banking services to underserved and underprivileged sections of society. They often establish branches in remote areas to enhance financial literacy, encourage savings and facilitate account-opening processes.
SFBs operate under the regulatory framework of several laws and regulations, including the Banking Regulation Act, 1949, the Reserve Bank of India Act of 1934, the Foreign Exchange Management Act, 1999 and others.
In FY24, SFBs are anticipated to achieve growth of 22-25% while maintaining stable profitability, with a return on total assets (ROTA) ranging from 2.1% to 2.4%.
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Best Small Finance Bank Stocks in India 2024 as per Analyst Ratings
Here is a table highlighting the best small finance bank shares as per analyst ratings provided by the I/B/E/S databases. Here, we have listed the stocks based on these ratings because stock market analysts rate a stock after careful market considerations and company performance:
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S.No. |
Small Finance Bank Stocks in India (as per analyst ratings) |
BUY Analyst Rating (in %) |
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1. |
93 |
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2. |
73 |
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*Our stock selection criteria for top stocks based on analyst ratings are mentioned at the bottom of this blog. |
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Top Small Finance Bank Stocks in India in 2024 as per Market Capitalisation
The following table outlines the list of top small finance banks in India sorted as per market capitalisations:
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S.No. |
Small Finance Bank Stocks in India (as per market capitalisation) |
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1. |
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2. |
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3. |
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4. |
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5. |
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*Our stock selection criteria for top stocks based on Market Capitalisation are mentioned at the bottom of this blog. |
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Overview of Best Small Finance Bank Stocks in India as per Analyst Ratings and Market Capitalisation
Below, you will find a comprehensive overview of the small finance bank stocks ranked by analyst ratings and market capitalisation.
1) AU Small Finance Bank
Established in 1996 as AU Financiers (India) Limited, AU Small Finance Bank has focused on serving underbanked and unbanked areas over the past 2 decades. The bank offers a comprehensive range of products, including savings and current accounts, ATMs, lockers, recurring deposits, fixed deposits, EMI calculators, interest calculators, etc.
AU Small Finance Bank offers personal loans, home loans, vehicle loans, loans against vehicles and gold loans. Its insurance segment covers life insurance, health insurance, motor insurance, SME insurance, pocket insurance and more.
The AU Small Finance Bank also provides services like net banking, video banking, WhatsApp banking, missed call banking and mobile banking. Presently, it boasts a network of over 1,042 touchpoints across India.
2) Ujjivan Small Finance Bank
Started operating as an NBFC in 2005, Ujjivan Financial Services Limited (UFSL) provides a wide range of financial services to the ‘economically active poor’ who lack sufficient support from financial institutions.
The bank operates across 4 segments: personal banking, corporate banking, business banking and rural banking. It offers savings accounts, current accounts and deposit accounts, along with services like third-party insurance product distribution, ATM or debit cards and Aadhaar enrollment.
Ujjivan Small Finance Bank provides different types of loans including vehicle loans, home loans, gold loans, MSME loans, crop loans, Kisan Suvidha Loans and more. Furthermore, it has around 441 ATMs, 18 ACRs, and two 24/7 phone banking units in Bangalore and Pune. The bank is present in 26 states and Union Territories.
3) Equitas Small Finance Bank
Equitas Small Finance Bank Limited, originally operated as V.A.P Finance Private Limited, was incorporated on June 21st, 1993. Later, in September 2015, it became a public limited company and changed its name to Equitas Finance Limited.
Headquartered in Chennai, Equitas Small Finance Bank offers a wide range of banking services to financially underserved segments across India. The bank operates in two segments: personal and business. Equitas Small Finance Bank specialises in offering loans for homes and cars.
The bank offers a variety of asset products tailored to different customer profiles. These include Small Business Loans (SBLs) such as loans against property, housing loans, and agriculture loans for micro-entrepreneurs. Besides providing loans, it offers healthcare, education, skill training centres and job fairs, particularly in South India.
4) Utkarsh Small Finance Bank Limited
Headquartered in Varanasi, Utkarsh Small Finance Bank Limited became a Public Limited Company on April 30, 2016. Engaged in offering banking and financial services, the bank primarily serves customers in unbanked and underbanked areas.
The bank is categorised into segments comprising personal banking, business banking and micro-banking. It provides an array of banking products, including different types of savings accounts, recurring and fixed deposits, insurance and investments, loans, digital products and more.
Utkarsh Small Finance Bank Limited also offers different banking methods, including ATM banking, internet banking, mobile banking, UPI, etc. Furthermore, the bank provides different types of loans, including loans against property, gold loans, home loans, etc. It also focuses on empowering women by offering financial literacy programs and loans tailored for women entrepreneurs.
5) Jana Small Finance Bank
Jana Small Finance Bank, headquartered in Bangalore, started operations in 2018 and operates 771 banking outlets across 22 states and two union territories, including 278 outlets in unbanked rural centres.
The bank serves about 12 million customers, with 4.87 million active ones. Its offerings include savings accounts, current accounts, deposits, loans, cards, online banking, payments, insurance, and safe deposit locker facilities.
The bank’s loan services cover various categories, such as home, group, business, agricultural, gold, and two-wheeler loans. Online banking services encompass mobile and Internet banking, while savings accounts come in various types, such as premium, silver premium, and DIGIGEN.
Factors to Consider Before Investing in Small Finance Bank Stocks in India
Before picking small finance bank stocks for your portfolio, keep these key points in mind:
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Market Reputation
Assess how the bank is perceived in terms of adhering to regulations and customer satisfaction. A bank with a strong reputation for rule compliance and customer satisfaction is generally considered a safer investment option.
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Competitive Landscape
Compare small finance banks to regular banks and post offices. See what advantages and disadvantages they have. Understanding these differences helps you assess the competitive position of the bank in the market.
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Customer-centric Approach
When looking at small finance bank stocks, it is important to note their focus on customers. Check whether they meet customers' needs and prioritise customer satisfaction. This can result in higher customer retention rates, stronger brand reputations, and, ultimately, potential growth in revenues and profitability.
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Interest Rates
Try to understand how the rates that a bank offers affect their money-making and your profits. Changes in interest rates can have a big impact, possibly affecting the stocks price.
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Financial Performance
Examine how profitable the bank is, along with factors like net interest margins, asset quality, and how well they manage risks. This helps you understand if the bank is stable and has room to grow financially.
Should You Invest in Small Finance Bank Stocks?
Small finance banks present potential growth opportunities but have certain risks. Economic cycles can significantly impact these banks, with downturns leading to decreased consumer spending and borrowing, thereby affecting their profitability. Moreover, the risk of loan defaults poses a considerable threat, especially during economic downturns when more borrowers may struggle to repay their loans.
Small finance banks are also vulnerable to interest rate fluctuations, which can impact their profitability. Therefore, before buying small finance bank stocks, you must conduct thorough research and carefully consider your risk appetite. Additionally, you can seek guidance from a financial expert who can help you choose the stock tailored to your needs.
The Bottom Line
Investing in small finance bank shares in India can be rewarding due to their focus on financial inclusion. These banks make strong efforts to assist underserved communities and drive economic growth through priority lending. But remember, these companies' performance is also prone to market risk; hence, considering investment factors before putting money is essential.
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*Stock Selection Criteria for Top Stocks Based on Analyst Rating Investors must carefully read through the following information on stock selection criteria while running through the stocks based on analyst ratings- These stocks have been shortlisted as per Analyst ratings provided by the I/B/E/S (The Institutional Broker’s Estimate System) database, further aggregated by Refinitiv. Ratings are determined by analysts' forecasts of company performance, taking into account metrics like earnings per share, sales, and net income. These ratings should not be construed as investment advice/recommendations/offer/solicitation of an offer to buy/sell any securities by Groww Invest Tech Pvt. Ltd. (formerly known as Nextbillion Technology Pvt. Ltd.). Before investing, investors must conduct independent research and not solely rely on the information provided here. This will allow investors to make appropriate investment decisions based on their financial goals, investment objectives and risk tolerance. |
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*Stock Selection Criteria for Top Stocks Based on Market Capitalisation These stocks are chosen based on their market capitalization, which represents the total value of a company's outstanding shares. The selection is arranged in descending order, placing the largest companies first and the smaller ones later. This helps prioritize stocks based on their market size. It is important to note that market capitalization in no way guarantees a company’s performance or the returns from its stocks. However, it can be used as a criterion for shortlisting companies from within a sector. Investors should recognize that other factors, such as financial health, management efficiency, and market trends, play crucial roles in determining the actual success of an investment. This stock selection should not be construed as investment advice/recommendations/offer/solicitation of an offer to buy/sell any securities by Groww Invest Tech Pvt. Ltd. (formerly known as Nextbillion Technology Pvt. Ltd.). |
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Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory. To read the RA disclaimer, please click here |