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Fino Payments Bank has received in-principle approval from the Reserve Bank of India (RBI) to convert into a small finance bank (SFB).

Under RBI’s “on-tap” licensing rules, a payments bank run by resident promoters and with at least five years of operations can apply for SFB status. Fino met these conditions, and the central bank evaluated its application under the standard procedure laid out in the guidelines.

However, the approval does not immediately make Fino an SFB. The bank must now complete all regulatory requirements before the RBI issues a final licence.

Notably, Fino applied for the SFB licence in January last year. The regulatory clearance comes after a year marked by multiple compliance actions against the bank.

In October 2025, Fino settled a disclosure-lapse case with SEBI by paying INR 5.89 Lakh. The case stemmed from a show-cause notice issued last year over delays and inadequacies in reporting material events.

SEBI had flagged that the bank received 15 complaints related to fraudulent investment schemes run by its employees. Fino appointed KPMG to investigate, which found that 19 employees ran unauthorised investment schemes between December 2021 and April 2023.

Earlier this year, the RBI also imposed a penalty of INR 29.6 Lakh on Fino for non-compliance with directions related to payments bank licensing.

On the financial front, Fino reported a 27.5% decline in net profit to INR 15.3 Cr in Q2 FY26, dragged down largely by higher tax expense and lower income from traditional transaction businesses. Income from interest rose 26% to INR 60.1 Cr from INR 47.7 Cr in Q2 FY25. It was almost flat compared to INR 60.9 Cr interest income in the preceding June quarter.

Other income, meanwhile, declined 16.6% YoY to INR 407.6 Cr.

Shares of the payments bank ended today’s trading session 3.88% higher at INR 314.65 on the BSE.

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