Fino Payments Bank Limited has announced that it has received in-principle approval from the Reserve Bank of India (RBI) to transition into a Small Finance Bank (SFB). This makes Fino the first and only payments bank to achieve this milestone, marking a significant step in its growth strategy. The bank highlighted that this approval validates the work done in building a compliant, scalable, and resilient banking platform. The transition to an SFB will enable Fino to introduce multiple new revenue streams to its existing business model. The bank has maintained a deliberate focus on quality over quantity in its operations, prioritizing sustainability and scalability in merchant onboarding, deposit growth, and client acquisition. Fino Payments Bank enters this transition with a strong CASA-based liability of approximately ₹2,500 crores, supplemented by deposits with other banks of about ₹500 crores, totaling nearly ₹3,000 crores of low-cost deposits. This CASA base, with a cost of funds under 2% for over nine months, provides a structural advantage for its lending business. The bank aims to maintain a Net Interest Margin (NIM) of around 10% on a largely secured portfolio, including loans to MSME, affordable home loans, LAP, micro LAP, and select gold loans. The bank targets a loan book of ₹8,000 crores to ₹10,000 crores by FY 2030, with a credit-deposit ratio around 75% in the initial years. The aspiration is to achieve over 20% ROE in the medium term. The bank's merchant-led ecosystem, engaging over 20 lakh merchants, will be a key differentiator, allowing for lower acquisition costs and better customer insights. Fino plans to invest approximately ₹15 crores annually on physical infrastructure for its SFB operations. On the technology front, the migration of its core banking system to Finacle is complete, providing a flexible and scalable backbone. The bank expects to invest about ₹100 crores in additional technology stack for the SFB over the next year. In Q3 FY 2026, Fino Payments Bank's average deposits grew 32% year-on-year to ₹2,496 crores. Digitally active customers grew 22% year-on-year to nearly 60 lakh. Renewal income grew 19% year-on-year to ₹57 crores. Digital throughput accounted for approximately 56% of the total throughput. The bank is also expanding its business reach through strategic tie-ups with payment aggregators and gateway partners. For the nine months ended FY 2026, digital throughput increased by approximately 31% year-on-year to ₹196,740 crores. Higher-margin businesses, led by CASA and renewal income streams, now contribute approximately 41% of total revenue. In Q3 FY 2026, revenue stood at ₹394.4 crores, with EBITDA at ₹63.9 crores and an EBITDA margin of 16.2%. For the nine months period, EBITDA expanded to ₹187.1 crores with a margin expansion of over 240 basis points year-on-year. The bank aims to operationalize as an SFB by the last quarter of FY 2027 or the first quarter of FY 2028. The transition will involve incremental IT investments of approximately ₹100-odd crores and infrastructure CapEx of around ₹15-odd crores. The bank expects to achieve a +20% ROE in the medium term.
