Small Finance Banks Ramp Up Senior Hiring for Universal Banking Transition
India's small finance banks (SFBs) are strategically expanding their horizons beyond their traditional niche. As several of these lenders prepare for a potential shift to universal banking, they are intensifying efforts to recruit senior executives from larger banks and non-banking financial companies (NBFCs). This move aims to bolster leadership capabilities and scale operations effectively, according to industry insiders familiar with these developments.
Major Players Leading the Charge
The transition initiative involves prominent small finance banks including AU Small Finance Bank, Ujjivan Small Finance Bank, Suryoday Small Finance Bank, and Utkarsh Small Finance Bank. These institutions are actively seeking to onboard senior professionals such as key business officers, vice-presidents, and executive vice-presidents to strengthen their management teams.
While spokespersons for AU, Utkarsh, and Ujjivan have declined to comment on specific hiring strategies, the broader industry trend indicates a significant shift in talent acquisition patterns. This development underscores how, more than a decade after the Reserve Bank of India (RBI) introduced small finance bank licenses, certain segments of this sector are preparing for a more sophisticated growth phase where managerial expertise and talent depth are becoming as crucial as rapid balance-sheet expansion.
Regulatory Landscape and Transition Guidelines
The regulatory framework for this transition has been gradually taking shape. In August, RBI granted conditional approval to AU Small Finance Bank's proposal to become a universal bank, while Ujjivan Small Finance Bank's application submitted in February remains under regulatory review. The central bank had originally established transition guidelines in 2014 that allowed SFBs to upgrade to larger banks upon meeting specific criteria.
Ten years later, RBI published updated eligibility requirements for SFBs seeking universal banking licenses. According to these guidelines, only listed small finance banks qualify for consideration. Applicants must demonstrate a minimum net worth of ₹1,000 crore, maintain a satisfactory performance track record for at least five years, and show net profits in the two most recent financial years.
Talent Acquisition Strategies and Compensation Trends
The aggressive hiring spree by small finance banks reflects their strategic priorities. Upasana Agarwal, partner at professional and financial services firm ABC Consultants, explains that SFBs are specifically seeking talent to build product expertise, enhance technology capabilities, strengthen sales leadership, and fortify overall management structures. "The talent demand in SFBs is for building product, technology, sales leadership and for strengthening management, for which we are hiring from NBFCs and banks," Agarwal stated.
Candidates from larger banking institutions are increasingly willing to consider opportunities at small finance banks due to significant career advancement prospects. For instance, a senior vice-president of finance at a traditional bank might transition into a chief financial officer role at an SFB. According to industry experts, these moves typically involve "bump ups" in compensation packages and substantial role elevation.
Veinu Nehru, managing partner at Fynehand Consultants, notes that small finance banks recognize the need to offer competitive compensation to attract talent from universal banks. "These banks know that to hire from universal banks, they will have to pay up and many are preparing to become universal banks themselves, which would mean branch expansion and more people at various levels," Nehru explained.
Hiring Momentum and Workforce Expansion
The recruitment drive extends beyond senior positions to include junior roles as well. Aditya Narayan Mishra, managing director and CEO of talent solutions firm CIEL HR, reveals that SFBs have increased hiring at junior levels by approximately 30% as they expand operations on a large scale. These institutions are recruiting sales executives primarily from other banks and NBFCs.
Statistical evidence supports this hiring momentum. According to RBI data released in December 2025, small finance banks added 26,736 employees during that year. This growth occurred while public sector banks increased their workforce by just 1,626 people and private sector banks reduced staff strength by 7,257. Although SFBs operate from a smaller base compared to traditional lenders, their 18% workforce expansion represents substantial growth within the banking sector.
Historical Context and Performance Metrics
Small finance banks were conceptualized following recommendations from a committee chaired by RBI's former board member Nachiket Mor in 2014. These institutions were established to provide basic banking services to underserved segments of the population, including small businesses and marginal farmers. Unlike universal banks that must allocate 40% of their loans to priority sectors, small finance banks face a higher requirement of 60%.
Despite these regulatory differences, SFBs have demonstrated remarkable growth. According to Care Ratings analysis, between fiscal years 2022 and 2025, these banks achieved a 28% compounded annual growth rate in deposits and 25% growth in advances. These figures significantly exceed industry averages of 12% and 16% respectively for the same period.
Challenges and Future Prospects
Despite their impressive growth trajectory, small finance banks continue to face certain challenges. Low-cost deposits remain a particular concern, with current and savings account (CASA) deposits constituting just 26.2% of total deposits as of March 2025. This compares unfavorably with universal banks and results in higher funding costs of 7.3% versus the overall banking sector average of 5.3%.
As these institutions navigate their transition toward universal banking, their ability to attract and retain talent while managing operational costs will significantly influence their success. The current hiring surge represents a strategic investment in human capital that could determine whether these niche lenders can successfully transform into comprehensive banking institutions capable of competing with established players in India's financial landscape.
