Fino Payments Bank Progresses Toward Small Finance Bank Transition by Q4 FY27

Fino Payments Bank Ltd (FPBL) is advancing its preparations to transition into a Small Finance Bank (SFB), according to Interim CEO Ketan Merchant. The bank stated that it is on course to submit its formal readiness to the Reserve Bank of India (RBI) by the end of the fourth quarter of fiscal year 2027.

The central bank granted 'in-principle' approval to FPBL for the SFB conversion on December 5, 2025. Under RBI guidelines for 'on tap' licensing of private sector SFBs, existing payments banks controlled by residents that have completed five years of operations are eligible to apply for conversion.

To support the operational requirements of the upcoming SFB, the bank has appointed PricewaterhouseCoopers to assist with implementation and readiness. In addition, FPBL has onboarded technology partners to build out its loan origination system, loan management system, and other lending applications. The end-to-end customer loan journey technology stack is currently under development and is scheduled to be ready by February 2027.

Speaking during an analyst call, Merchant noted that the bank is concurrently strengthening its governance framework by establishing required policies, operating procedures, and compliance processes. The bank's current strategy focuses on the retail segment, customer acquisition, and referral lending as it prepares for the transition.

FPBL reported that its capital position remains comfortably above the regulatory requirement of a minimum paid-up voting equity share capital or net worth of ₹300 crore stipulated for the proposed SFB.

The bank outlined three core competitive strengths to anchor its differentiated SFB model. These include a strong liability franchise providing a structural advantage in cost of funds, a predominantly secured and asset-light lending model leveraging a network covering over 95 percent of India's pin codes, and a technology platform built around Finacle and AI-enabled lending capabilities.

Interim CFO Anup Agarwal added that the bank's cost of funds structure is expected to provide an advantage of approximately 300 basis points compared to other small finance banks in the future.

"The transition from a payments bank to a small finance bank represents a significant structural shift that requires rigorous technological integration, regulatory compliance, and governance alignment. Fino Payments Bank's structured timeline toward its Q4 FY27 submission highlights the importance of methodical preparation in navigating complex banking license conversions in India. Building robust lending stacks and maintaining capital buffers above regulatory requirements will be key factors in determining long-term operational success in the competitive retail lending space." — Dr. Shishir Gupta, Founder & CEO, StartupLanes