CAPITAL ADEQUACY, DEPOSITS AND SPREAD OF SMALL FINANCE BANKS IN INDIA

Abstract

Small Finance Banks (SFBs) play a vital role in advancing financial inclusion in India, making performance assessment essential from a regulatory perspective. This study evaluates the financial performance of selected Small Finance Banks using three key indicators: capital adequacy, deposit mobilization, and interest spread. A ranking-based approach is applied, and mean scores are computed to derive overall performance rankings. The results reveal considerable variation in performance across banks, indicating uneven financial resilience within the sector. Banks exhibiting balanced performance across all indicators consistently achieved superior rankings, whereas institutions with weaknesses in multiple dimensions recorded lower positions. Ujjivan Small Finance Bank emerged as the top performer, reflecting effective capital management, stable deposit growth, and efficient spread management. In contrast, lower-ranked banks displayed structural inefficiencies that may affect long-term sustainability. The findings demonstrate that strong deposit growth alone is insufficient to ensure financial stability without adequate capital buffers and prudent spread management.