SFBs' balance sheet growth raises quality concerns, says RBI report

Restructured standard advances remain higher than pre-pandemic levels, though below the peak of Sep 2021; their share was 3.5% of total advances as of March 2022

The rapid growth in the balance sheets of small finance banks (SFBs) has raised concerns about asset quality, especially in standard restructured loans. The concentration of business in limited geographies and customer profiles are behind such development, according to the Financial Stability Report (FSR).

SFBs’ restructured standard advances remain higher than pre-pandemic levels, though below the peak of September 2021, RBI said. The share of restructured advances was about 3.5 per cent of total advances as of March 2022.

SFBs’ aggregate deposits and credit rose by 32.7 per cent and 23.1 per cent, respectively, during the four quarters of FY22. The growth