Small finance banks (SFBs) are enhancing risk controls and reducing unsecured lending, particularly microfinance, following asset quality stress. They aim to increase collateralized loans like gold, vehicle, and affordable housing loans by 2026-2027. This strategy is crucial for SFBs with significant microfinance exposure, such as ESAF, Suryoday, Ujjivan, and Utkarsh. The RBI's reduced priority sector lending target allows SFBs to diversify their portfolios beyond microfinance.