Indian microfinance firm Ujjivan Financial Services has started small finance banking operations by launching five pilot branches in the Indian state of Bengaluru, Karnataka.

The new bank will provide 5.5% to 8% interest rates on recurring and fixed deposits, 4% interest rate on savings accounts, along with an additional benefit of 0.5 percentage points for senior citizens.

Eventually, Ujjivan plans to extend the small finance bank offering to its existing 457 branches across 24 states in a phased manner.

Ujjivan was among the 10 entities who secured in-principle approval in September 2015 from the Reserve Bank of India (RBI) to launch small finance banks.

Small finance banks will be allowed to undertake basic banking operations of accepting deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities.

The bank will offer zero balance savings bank account with the full range of banking services such as door-step and paperless banking, mobile, internet and phone banking, access to biometric ATMs and Aadhar enabled debit cards.

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Ujjivan Small Finance Bank managing director and CEO Samit Ghosh said, “The launch of Ujjivan Small Finance Bank is a significant milestone. We started our journey as an NBFC in 2005 with a mission to empower the economically active low income group by providing them with a full range of financial services, which the SFB platform now enables us to do so.”