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Top 5 Small Finance Bank Stocks in India 2023

5 Small Finance Banks Stocks: An Right Option for Investors

RBI Initiated SFBs to Support Rural’s Unorganised Sectors. The Reserve Bank of India (RBI) has created a separate section of financing institutions to benefit rural and semi-urban communities.

The RBI has given permission to start small financing banking institutions that are similar to the Urban commercial and agricultural banks.

The small finance banks were developed to support the needs of unorganized sectors. They do include small businessmen, micro small, and medium enterprises, farmers, and so on.

The basic objective is to help those communities and the lending activities shall be provided with relaxation in the eligibility conditions. These small finance banks serve their customers in ways like savings, checking accounts, credit cards, and loans.

It has been observed that there are about 5 small finance banks in the stock building to provide better banking services. However, before progressing to explore small finance banks you need to understand the advantages of them to unorganized sectors.

Top 5 Small Finance Bank Stocks in India 2023

Across India, here is the list of the top 5 small finance bank stocks with respect to market capitalization.

  • AU Small Finance Bank – INR 34,669.71 cr
  • Equitas Small Finance – INR 5031 cr
  • Ujjivan Small Finance – INR 2,748.00 cr
  • Ujjivan Financial Services – INR 1,899.40
  • Suryoday Small Finance – INR 856.70 cr

1. AU Small Finance Bank

  • AU Small Finance Bank got permission from the RBI to run operations in rural India under the scheduled commercial banks.
  • The bank holds a deposit base of INR 44,278 cr, an asset under management (AUM) of INR 42,023, and the bank’s net worth is INR 7,127 cr.
  • The bank records P/E is 30.69 and P/B is 4.43, and profit growth is recorded as 73.49 percent. 

2. Equitas Small Finance:

  • Equitas is another influential stock and can be part of the diversified portfolio, and companies like HDFC, and Niyo have Equitas stocks.
  • Mutual fund companies have recognized the Equitas holding company for its outstanding performance for 2 years.
  • It records P/E to be 17.92 and P/B to be 1.19 and profit growth is 57.70 percent.

3. Ujjivan Small Finance Bank:

  • Ujjivan Small Finance Bank is the leading small finance institution initiated by Mr. Samit Ghosh, a Bangalore-based bank,  that encourages services like home loans, business, personal, online saving accounts, and vehicle loans.
  • This SFB has a stable credit rating and in the first quarter of March 2022, it observed a net income of INR 127 crore and had an unimpressive fiscal year 22 with a net loss of INR 415.00 crore.
  • The company records P/E as 0 and P/B as 1.07 and the profit growth is -97.63 percent.

4. Ujjivan Financial Services Limited:

  • Ujjivan Financial Services Limited has developed business models with a deep understanding of customer needs.
  • The bank received approval from the RBI in 2015 and the company brought in place a subsidiary Ujjivan Small Finance.
  • Ujjivan Small Finance conducts business operations by making investments in group companies through guarantees, and securities.
  • Small Finance has an advisory segment that provides good advice in relation to investments such as bank deposits, government securities, money markets, etc. The company has a P/E of 876.47, a P/B of 1.05, and a sales growth of -100.

5. Suryoday Small Finance Bank

  • Suryoday Small Finance Bank is a scheduled bank established per the RBI norms, located in Mumbai Maharashtra, India.
  • It had rendered services to about 1 million customers since 2009 and took the form of a new-age bank seeking conversion from a microfinance institution.
  • As part of the small financing operations, the company offers a credit product suite of MFI, shopkeeper, and Vikas loans. In addition, the bank is acknowledged for serving Retail Banking, JLG loans, MSME loans, Loans against property, and financial services.
  • The company has a P/E ratio of 0, P/B is 0.57 and sales growth is -89.31 percent.

Investment in Small Finance Bank Stocks Is Not a Bad Idea

You can give a try in investing in small finance bank stocks and if you understand the advantages you shall certainly head towards it.

Benefits in Investing for SFBs Stocks Are Likewise:

Gather Bigger Customer Database:

It is totally new in India, and with increasing rural operations then you will find an increase in customer databases. Hence, your investment can reap strong returns.

Commercial banks cannot concentrate on the unorganized sectors and underserved segments find excellent recognition. Since this segment is untouched, the small banks can reap better profits from the performances. The feature includes small businesses, farmers, and low-income households.

Possibility of increase in Profits:

With the evolving technologies, you can concentrate better on unorganized sectors and more importantly the technology can bring down costs and translate the investments into higher returns.

Flexible RBI Regulations:

With the RBI backup, small bank businesses can have a good deal of stability and security for the investors. However, the investment will always carry risks and uncertainties like any business operation. Hence, it would help if you did adequate research about the bank before making a stock investment.

Diversification Activity:

An investor does opt for stock diversification at the stock exchange to make balanced trading. When you create an investment portfolio, picking small banks’ stock is also a good option as it is safe and secure. The activities are monitored and regulated by the RBI. The SFB exposes different sectors of the economy to benefit and improvise economic conditions.

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