Technological Challenges and Advantages of Small Finance Bank in India: A Descriptive Study on Digital Financial Inclusion
DOI:
https://doi.org/10.64882/ijrt.v14.iS1.1074Keywords:
Small Finance Bank, Fintech, E-KYC, Artificial Intelligence, Unified Payments Interface (UPI)Abstract
This paper examines how technology both facilitates and impedes the digital financial inclusion efforts of Small Finance Banks (SFBs) in India. The Reserve Bank of India set up SFBs to help small enterprises, marginal farmers, and low-income households that do not have access to traditional banking services. SFBs are now using digital channels like mobile banking, UPI, AEPS, and e-KYC more and more to provide low-cost, scalable financial services. Using a descriptive research design based on secondary data from regulatory reports, published bank documents, and prior empirical studies, the study synthesizes evidence on the technological advantages of SFBs—cost reduction, rapid onboarding, data-driven lending, and 24/7 access—against key challenges, including weak rural digital infrastructure, cybersecurity vulnerabilities, low digital literacy, high implementation costs, and complex compliance requirements. The analysis indicates a clear “digital paradox”: while technology facilitates wider outreach and operational efficiency, it simultaneously introduces risks of transaction failures, dormant accounts, and customer mistrust that dilute the intended impact on financial inclusion. The paper concludes by proposing broad policy and managerial recommendations such as strengthening rural connectivity, enhancing cybersecurity frameworks, investing in digital literacy and agent training, and leveraging fintech partnerships, thereby offering a structured agenda for making SFB-led digital inclusion more resilient and sustainable.
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