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Unity Small Finance Bank

Date: 15 October 2021 Tags: miscellaneous


A consortium of fintech company BharatPe and Centrum Financial Services Ltd were issued license of a small finance bank by the RBI.



Small Finance Banks are financial institutions that cater to the banking needs of underserved and underprivileged sections of the society.



  • The Centrum Financial Services and BharatPe have taken over the Punjab and Maharashtra Co-operative Bank, along with its assets and liabilities.

  • The coming together of the two entities will provide an opportunity for them to evolve their business into a bank.

  • This also provides an opportunity to resolve the PMC Bank crisis. The main aim of the entity is to become India’s first Digital Bank.


Banking model

  • The small finance banks and non-banking financial companies are collaborating with fintech companies to obtain and monetise the data collected by these consumer tech firms.

  • This is similar to buy-now-pay-later (BNPL) and the micro-lending models where creditworthiness of an existing customer is presented to the lender as a potential borrower.

  • BharatPe aims to offer its small and medium sized merchant customers a bank account and give them lending services based on their transactions.



  • In recent times, the borrowing rate has been very low. However, there are many small and medium sized borrowers who borrow at higher-than market rates.

  • These customers are not targeted by private or state-owned banks because their lending amount is miniscule and they do not have proper collateral.

  • The deposit rates of small finace banks will usually be higher to attract depositors but their lending rates will be good enough for getting borrowers.

  • The BNPL model is fast becoming attractive due to its policies. There are predictions that their market share could increase to 9% by 2024.