Top Small Finance Bank Stocks in India

India’s banking sector has undergone significant changes in the last ten years. Small finance banks are becoming key players in expanding financial access and serving rural communities. As we navigate through 2025, small finance bank stocks in India are gaining attention from investors as they offer both growth potential and positive social impact. In this blog, we will explore the best small finance bank stocks in India.

Understanding Small Finance Banks in India

In 2014, the RBI established Small Finance Banks (SFBs) to improve financial inclusion and provide banking services to micro and small businesses, small and marginal farmers, small business units, and unorganised sector organisations. Currently, there are 11 small finance banks in India. 

Over the last two fiscal years, this sector has experienced tremendous growth, with FY2024 showing a significant 24% rate. Reports suggest that the small finance banks will show a growth from 18–20% in FY25 to 20–23% in FY26. The gross non-performing asset (GNPA) is anticipated to increase from 2.1% in FY 2024 to 2.6% to 2.8% in 2025, especially in the microfinance sector.

With supportive regulatory frameworks and increasing demand for accessible financial services, the future of Small Finance Banks in India appears promising. These banks are well-positioned to drive financial inclusion, especially in rural and semi-urban areas, by extending credit and banking solutions to underserved segments. 

Best Small Finance Bank Stocks in India (2025)

Here’s a list of small finance bank stocks in India, ranked by market capitalisation for investors.

An Overview of India’s Top Small Finance Bank Stocks

Here is a thorough description of India’s best small finance bank stocks for the long term:

1. AU Small Finance Bank

AU Small Finance Bank stands as the undisputed leader in the best small finance bank sector stocks. With its headquarters in Jaipur and 2400 Touchpoints in 21 States and 4 Union Territories, AU Bank has built a robust franchise serving millions of customers across urban, semi-urban, and rural markets. 

The bank has built a diversified business model spanning vehicle finance, SME lending, retail banking, and commercial banking services. In FY25, the AU bank delivered a 32% year-on-year growth in net profit to ₹2,106 crore and a 55% increase in net interest income to ₹8,012 crore. The bank’s financial performance has been consistently impressive, with Return on Equity (ROE) maintained above 13% and Return on Assets (ROA) at 1.5%. 

With GNPA below 3%, AU Bank’s asset quality is robust, indicating its excellent underwriting skills and risk management practices. With more than 1.1 million monthly active users and an extensive range of digital banking products, it is an ideal long-term investment opportunity.

2. Ujjivan Small Finance Bank

Ujjivan Financial Services Limited (UFSL) started operating as an NBFC in 2005. The bank got its small finance bank license in 2017, and it is currently providing services in 26 states and union territories with 752 banking touchpoints to over 9 million customers.

UFSL provides banking services in 4 areas, which include corporate, business, personal, and rural banking. The bank provides different types of loans like vehicles, housing, gold, MSME, crop, Kisan, etc. 

With a net profit (PAT) of ₹726 crore on a total income of ₹7,201 crore in FY25, Ujjivan SFB recorded an 11% increase in revenue from the previous year. The bank’s Q4 FY25 net profit was ₹83.4 crore. Additionally, its asset quality also improved sequentially, with Gross NPA at 2.18% (down from 2.68% in Q3) and Net NPA at 0.49%, making it an attractive investment opportunity. 

3. Jana Small Finance Bank

Jana Small Finance Bank was established in 2018. With its headquarters in Bangalore, the SFB is present in 22 states and 2 union territories in India, serving millions of consumers. Jana Small Finance Bank has a network of more than 771 banking outlets across India.

In Q4FY2025 results, the bank’s interest income increased by 8% to ₹1,999.27 crore, up from ₹1,111.84 crore during the same time the previous year.  In 2025, Jana Small Finance Bank’s stock has increased 29.27% year-to-date (YTD). 

The bank offers home loans, group loans, business loans, agricultural loans, gold loans, and two-wheeler loans. In remote locations, the bank’s digital initiatives, like agent banking networks and mobile banking platforms, are boosting its client acquisition and operational efficiency. Jana Bank’s dedication to financial inclusion and potential growth trajectory make it a suitable investment option.

4. Suryoday Small Finance Bank

Suryoday Small Finance Bank, headquartered in Navi Mumbai, is recognised for its innovative approach to inclusive banking and a diversified presence across western and southern India. The bank operates through over 700+ banking outlets across 15 states and UTs, serving an over 3.3 million customer base that spans urban, semi-urban, and rural segments.

Suryoday SFB’s core strength lies in its microfinance and affordable housing lending, complemented by a growing portfolio in vehicle and MSME loans. In Q4FY25 results, the bank posted a net loss of ₹34 crore for the fourth quarter, and its Pre-provision operating profit was Rs 47 crore. 

Currently, the Credit Guarantee Fund for Micro Units Scheme covers around 95% of the bank’s unsecured portfolio. Suryoday SFB is accelerating its digital transformation, with a focus on expanding digital savings and lending products, making this SFB a resilient and forward-looking player in the top small finance bank stocks in India.

Factors to Consider Before Investing in Small Finance Bank Stocks

You should consider the following factors before picking your basket of best-performing small finance bank stocks in India:

Financial Performance

Before investing in small finance bank stocks, you should closely examine key financial metrics such as net interest margin (NIM), return on assets (ROA), and return on equity (ROE). These figures reveal how efficiently a bank is generating profits from its lending and investment activities.

Asset Quality 

The bank’s asset quality should be assessed by investors since it indicates how exposed it is to risk. Banks that have a low percentage of non-performing assets (NPA) are more likely to produce steady returns and have better loan management practices.

Risk Management

Additionally, you should also review the bank’s approach to risk management, including loan portfolio diversification and provisioning for bad loans, to ensure it is well-prepared to handle adverse economic cycles.

Capital Adequacy 

The bank’s capacity to withstand possible losses and preserve stability is demonstrated by a strong capital adequacy ratio. This ratio is a crucial measure of the bank’s ability to manage its financial difficulties.

Regulatory Compliance

To guarantee they have sufficient reserves to survive financial shocks, SFBs are required to comply with regulatory capital standards established by the RBI. Regular compliance with regulatory norms, including liquidity and priority sector lending mandates, further supports the bank’s long-term sustainability.

Market Position 

Investors should evaluate the bank’s market reputation, customer base, and competitive strengths before investing. Understanding the competitive landscape helps assess whether the bank can maintain or grow its market share amid competition from larger banks and fintech players.

To Wrap Up

In 2025, the future of the small finance bank stocks sector in India presents an exciting opportunity for investors looking beyond traditional bank stocks. Their focus on financial inclusion, combined with improving metrics and expansion strategies, makes them an attractive option for investors seeking long-term wealth creation.

Whether you’re a seasoned investor or a beginner, start exploring the best finance sector stocks by opening a demat account with Share.Market.

FAQS

Disclaimer: Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

Registration granted by SEBI, enlistment as a Research Analyst with the Exchange and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. The securities are quoted as an example and not as a recommendation.

This is for informational purposes and should not be considered as recommendations. Kindly refer to  https://share.market/ for more details. PhonePe Wealth Broking Private Limited, Research Analyst with SEBI Regn No: INH000013387, BSE RA Enlistment Number: 5887.