Of the 10 shortlisted candidates for small bank license by RBI, eight are micro finance institutions (MFIs), one mainly a commercial vehicle financier and one a local area bank.
Earlier this week, RBI granted in-principle approval to entities to start Small Finance Bank.
The total managed loan assets of the 10 SFBs was Rs 20,100 crore and balance sheet size was around Rs 22,200 crore in 2014-15, Ind-Ra said adding that MFIs that have received approval as a universal bank and SFBs, stood at 54 per cent of NBFC-MFI gross loan portfolio in FY15.
Reserve ratios and deposit insurance will reduce systemic risk, and over time lower deposit cost could be transmitted to lower lending rates, it added.
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These institutions will, at least for the next two to three years, target the same segment as the balance NBFC-MFIs in most states, it added.
Ind-Ra further said, SFBs would need to lend to the under-banked, which means higher investment into systems/ processes and lending to individuals rather than groups, which will push up credit risk and cost, thus return on assets may decline to 1-2 per cent from 2-3 per cent in FY'15.
They will need to raise equity of Rs 2,000 crore and tier two capital of around Rs 1,500 crore by 2017-18, it said.