and more pertinently further deepening of financial inclusion. thus, the goal for small finance banks is not'small '. on the contrary, it is very significant, as sfbs play a crucial role in extending financial services to the underserved, fostering entrepreneurship, and driving inclusive growth that will be essential for india's progress towards becoming a high - income economy. 1 / 5 bis - central bankers'speeches in a developing country like india, it is imperative for the financial sector, including small finance banks to strike a balance between profitability and social objectives. this can be achieved through a strategic focus on sectors that deliver high social impact, ensuring that financial growth is aligned with the broader goal of inclusive development. it is therefore essential for sfbs to actively participate in extending credit under various government sponsored schemes to promote greater accessibility of affordable credit, especially among the vulnerable sections of the society. as the target group of such lending is mostly the marginalised and underserved sections of the society, it is essential for the sfbs to adopt responsible lending practices. it is disheartening to come across egregious practices by some sfbs, such as charging excessive interest rates, collecting instalments in advance as well as not adjusting such advance collections against loan outstanding, levying of usurious fees, etc. it is also observed that grievance redressal mechanism is far from adequate in most sfbs. i therefore feel that periodically reviewing how your bank is fulfilling its financial inclusion objectives is an area that boards should give much deeper consideration to. it is not just about meeting regulatory requirements such as priority sector lending but also about assessing the true impact of your efforts on underserved communities. boards can reflect on whether the bank is genuinely reaching marginalised groups, such as low - income households, small businesses, and rural populations, and how effectively it is using technology and innovative products to bridge financial gaps, as these were the objectives of having a differentiated licensing for sfbs. strengthening governance an effective governance framework is the foundation of resilient and well managed institutions, especially in the context of banks. there needs to be a clear division of responsibilities between the board and the management to ensure smooth functioning of the bank. while the board is responsible for setting the overall strategic direction, establishing policies, and ensuring that the bank adheres to regulatory frameworks and ethical standards, the management is responsible for the execution of the board's strategy and operations. it is the

digital footprint, these banks face significant operational risks from growing cyber threats, digital frauds, and possible data breaches. the cyber security landscape is evolving rapidly, and sfbs must stay ahead of emerging threats to protect their customers'data and maintain operational resilience. the sfbs should adopt robust business continuity plans and effective it outsourcing strategies. there is also a need to ensure rigorous change management processes, comprehensive data protection measures, vigilant transaction monitoring, stringent access controls and network security protocols. these measures will help sfbs to significantly enhance their it resilience against possible disruptions. operational risk fourthly, while i have covered cybersecurity threats, i would also like boards of sfbs to be mindful of the larger issue of operational risks. during periods of rapid growth, the focus on increasing market share, launching new products, and acquiring customers can lead to a neglect of essential risk management practices. for example, hastily onboarding new customers without thorough kyc due diligence or rushing the deployment of technology solutions without adequate testing can increase the likelihood of frauds, errors and service disruptions. growth is important for the success of small finance banks. however, it must not come by overlooking operational controls. another significant area of concern for operational risk is the high attrition rate among staff in small finance banks. while the branch network and employee headcounts are expanding, the sector faces a very high attrition rate of nearly 40 per cent, particularly among frontline staff and junior management. such elevated turnover, though mostly at the entry and junior management levels, poses substantial operational risks, as it can lead to a loss of institutional knowledge, disruption in service delivery, and increased 4 / 5 bis - central bankers'speeches training costs for new hires. to mitigate these risks, board - level efforts are essential to focus on employee retention strategies at all levels. further, the absence of succession planning for critical managerial positions is a common issue across sfbs, which requires immediate attention from boards to ensure a smooth transition of leadership and maintain operational effectiveness. conclusion in conclusion, sfbs with their outreach to rural and semi - urban areas, are intended to be one of the key enablers in credit offerings to individuals, weaker sections, entrepreneurs, shgs / jlgs and msmes. they have a large role to play in achieving our aspirational goal of becoming a developed nation by 2047. as rbi celebrates 90 years of its foundation