Fino Bank Plans to Pursue Universal Bank License Within Ten Years
Fino Payments Bank, backed by Fino PayTech, has received in-principle approval from the Reserve Bank of India (RBI) to transition into a small finance bank (SFB). This significant move, announced in early December 2025, will enable the bank to expand its lending operations following a restructuring process. With major stakeholders including Bharat Petroleum, ICICI Bank, Blackstone, and Intel Capital, Fino Payments Bank aims to leverage its existing customer base and digital-first approach to enhance its financial services.
Strategic Advantages of Transitioning to a Small Finance Bank
Fino Payments Bank is poised to capitalize on its unique position as it transitions to a small finance bank. Unlike many SFBs that originated from microfinance, Fino’s model is built on a digital-first and transaction-led foundation. The bank boasts a substantial customer base of over 1.6 crore, with 60 lakh active users on the Unified Payments Interface (UPI). This existing network provides a solid platform for introducing deposits and loans, enhancing the bank’s ability to generate revenue. Currently, Fino Payments Bank holds deposits exceeding Rs 3,000 crore, which are managed in-house and with partner banks at a low cost. The bank’s strategy includes raising Rs 600–800 crore annually to maintain a stable current account savings account (CASA) ratio and secure affordable funding.
The timing of this transition is also favorable, as advancements in artificial intelligence (AI) are set to revolutionize banking operations. Fino plans to utilize AI to improve various processes, including customer onboarding and fraud detection. The bank’s focus will initially be on secured lending, adopting a low-cost, low-paper model that aligns with its digital-first approach. With over Rs 1,700 crore flowing through transactions, Fino Payments Bank is well-positioned to continue its growth trajectory under the SFB framework.
Investment and Infrastructure Development
To facilitate its transformation into a small finance bank, Fino Payments Bank plans to invest significantly in technology. In January, the bank will migrate its core banking system from FIS to Finacle, streamlining its operations. The bank has already made substantial digital investments over the past few years, and the focus will remain on maintaining a lean operational structure. Fino aims to establish over 100 branches and asset centers within three years, employing a hub-and-spoke model that minimizes fixed costs.
The asset centers will be responsible for managing merchant relationships and loans, while the branches will focus on gathering deposits. This merchant-first approach targets the middle-income segment through a tech-driven network, allowing customers to transition from small-value accounts to larger balances. The bank plans to offer small-ticket credit options, including micro loans and affordable housing financing. With a disciplined capital expenditure plan of Rs 100–150 crore over the next few years, Fino Payments Bank is set to enhance its infrastructure while keeping costs manageable.
Product Offerings and Market Strategy
Fino Payments Bank’s lending strategy will prioritize secured credit, leveraging technology to refine risk assessment while maintaining a personal touch. The bank plans to introduce a range of products, starting with affordable housing loans, followed by micro loans secured against property, small-ticket loans for merchants and micro, small, and medium enterprises (MSMEs), and gold loans. Personal loans will be offered selectively, utilizing data from customers and merchants to assess risk effectively.
Currently, around 35–40% of merchants already seek loans from other sources, and Fino aims to attract these borrowers to its platform. The bank will incentivize merchants to provide quality leads, enhancing its lending portfolio. In the future, Fino plans to introduce secured credit cards linked to customer deposits, with co-branded cards being a potential option. Additionally, the bank intends to expand its services to include insurance and mutual fund distribution, further diversifying its offerings.
Future Aspirations and Organizational Culture
Fino Payments Bank has ambitious plans for the future, including the potential to apply for a universal bank license by 2035. The bank’s leadership believes that if operations run smoothly and execution is strong, there is no reason not to pursue this goal. The regulatory framework allows for such an application after five years of successful operations as an SFB.
In terms of organizational culture, Fino Payments Bank aims to maintain its merchant-led DNA, which has been cultivated through years of experience in the payments sector. The bank plans to hire selectively, adding 500–600 employees over the next two to three years to support its expansion. With a current revenue of Rs 1,700 crore and a workforce of 3,000, Fino is well-equipped to leverage its existing infrastructure for growth. As the bank evolves, it will continue to prioritize digital connectivity and partnerships, ensuring that it remains competitive in the rapidly changing financial landscape.
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