Fino Payments Bank Limited (FPBL) is moving fast on its journey to become a Small Finance Bank (SFB). The bank's Interim CEO, Ketan Merchant, recently shared that the bank is on track to submit its final readiness report to the Reserve Bank of India (RBI) by the fourth quarter of the 2026-27 financial year (Q4FY27). This follows the 'in-principle' approval (initial permission) granted by the RBI on December 5, 2025.

According to RBI rules, Payments Banks can apply to become SFBs if they are controlled by Indian residents and have finished five years of work. Fino has already met these basic rules and is now working through an 18-month timeline to finish all required tasks. The bank has hired experts from PricewaterhouseCoopers (PwC) to help manage this big change and make sure everything is ready for full-scale banking operations.

A major part of this transition is building a new 'technology stack' (a group of software programs that work together). Fino is developing systems for loan origination (the process of applying for a loan) and loan management. These systems are expected to be ready by February 2027. This technology will allow the bank to handle lending, which is something Payments Banks are currently not allowed to do directly.

For bank officers and aspirants, this move is significant because it changes Fino’s business model. While Payments Banks can only take deposits and cannot lend, an SFB can give out loans. Fino plans to focus on retail customers and 'referral lending' (sending loan leads to others) for now. The bank also confirmed its capital is well above the required ₹300 crore net worth needed for an SFB license.

The bank claims it will have a 300 basis point (3%) advantage in cost of funds (the interest price a bank pays to get money) compared to other SFBs. This is because it already has a strong 'liability franchise' (a large base of low-cost savings accounts). They plan to use their massive network, which covers 95% of India’s pin codes, to find new customers and offer secured loans without needing a heavy physical branch setup.

In the coming months, Fino will continue to strengthen its governance framework (the rules and systems that manage a company). This includes setting up new compliance processes and operating procedures to satisfy RBI inspectors. The bank aims to use the 'Finacle' core banking software along with Artificial Intelligence (AI) to make their lending fast and efficient.

What should bankers watch next? The key date is February 2027, when the technology for the customer loan journey must be finished. If Fino succeeds, it will join a small group of Payments Banks that have successfully graduated to become full-service lenders. This transition will likely create new jobs in credit, underwriting, and loan recovery within the bank.