The small finance banks that were established about four years ago are strengthening as they get 8 percent incremental market share while their overall share is still around 1 percent. In the past three and half years, small finance banks have reported a robust 42 percent compound annual growth rate, the private banks reported 13 percent, and foreign banks 8 percent. However, the loan growth for public sectors banks was recorded to be lowest during the same period at 2 percent.
This signals the demand for small-ticket loans in rural and semi-urban areas and also reflects how the big lenders focused only on top-rated credit. Small finance banks have created a niche position in small-ticket loans and are slowly stepping into new credit product ICICI securities. These banks have targeted different markets and customers that can strengthen their core market position. Moreover, they have years of experience in extending credit to borrowers having undocumented income from informal sources.
Offered the microfinance roots for most of the small finance banks, they have a high credit market share in rural at 1 percent, urban at 1.7 percent, and semi-urban at 2.3 percent.
