Fino Payments Bank Pursues SFB Status Amid Financial Decline

Fino Payments Bank has announced its financial results for the fourth quarter and full fiscal year 2026. The bank achieved a significant regulatory milestone by securing RBI approval for its transition to a Small Finance Bank (SFB), while simultaneously reporting a sharp decline in its financial performance.

For the full fiscal year 2026 (FY26), Fino Payments Bank reported revenue down 14% year-on-year to ₹1,587.9 crore. Profit After Tax (PAT) saw a steeper fall of 43% to ₹52.5 crore.

During the fourth quarter (Q4'26), revenue dropped 31% year-on-year to ₹340.0 crore, with PAT declining 70% year-on-year to ₹7.1 crore.

Alongside these financial results, the bank achieved a major regulatory milestone: the Reserve Bank of India (RBI) granted in-principle approval for its transition to a Small Finance Bank (SFB), targeting a launch by Q1 FY'28.

Significance of SFB Transition

The RBI's approval is a significant development, potentially transforming Fino Payments Bank from a payments-focused entity into a full-service bank with lending capabilities. This move aims to unlock new revenue streams and deepen customer engagement.

However, the simultaneous sharp decline in revenue and profitability raises concerns about the bank's operational efficiency and market position.

Background

Fino Payments Bank, known for its 'phygital' model and extensive merchant network, has focused on financial inclusion since 2017. The pursuit of SFB status marks a significant evolution, making Fino the first payments bank to receive such an approval.

The bank implemented a new Core Banking System (CBS) in January 2026, a foundational step for future growth and operational scalability, particularly for lending activities. Transitioning to an SFB, which allows for unrestricted deposit collection and lending, has been a long-held strategic objective.

What Changes Now

• Expanded Services: As an SFB, Fino can offer a wider range of banking products, including term loans and unsecured credit, broadening its income base.
• Regulatory Pathway: Fino has 18 months to meet all conditions for the final SFB license, targeting Q1 FY'28.
• Business Model Evolution: Fino must integrate lending operations, requiring investment in technology and risk management.
• Deposit and Loan Growth: The bank aims to leverage its customer and merchant base for deposit mobilization and expand its referral loan book.

Risks to Watch

• Financial Performance: The year-on-year declines in revenue and PAT for FY26 and Q4'26 need urgent attention.
• Technical Glitches: A slight dip in UPI transactions (-0.05% in Q4'26) suggests potential for technical issues.
• Regulatory Scrutiny: Fino Payments Bank settled a SEBI case for ₹5.88 lakh over failure to promptly disclose employee fraud. This highlights past compliance issues.

Peer Comparison

Fino Payments Bank will enter the Small Finance Bank (SFB) landscape, competing with players like AU Small Finance Bank, Suryoday Small Finance Bank, and Equitas Small Finance Bank. These SFBs often focus on credit for MSMEs, small farmers, and unbanked segments – a market Fino aims to capture with its broad rural reach.

Key Metrics

• Average deposits grew 30% year-on-year to ₹2,403 Cr in FY26.
• Referral loan disbursals rose 3.5 times year-on-year to ₹1,285 Cr in FY26.
• Q4'26 PAT declined by 70% year-on-year to ₹7.1 Cr.