Suryoday Small Finance Bank which began operations last week with its Belapur CBD branch, plans to expand its network to 12 branches by March. Speaking to reporters, MD & CEO Baskar Babu said that the bank is in the process of raising Rs 100 crore through a rights issue which will take its networth to Rs 450 crore and expects to go public in 2020. Excerpts…
What are your expansion plans?
We launched our bank of January 23 with our branch in CBD Belapur and would be expanding our presence to five to six branches in February and expect to have 10-12 branches by March. The intent is to expand in a meaningful manner as the banking landscape is getting redefined. Ability to be nimble, close to the customer without having a large branch infrastructure is what the banking industry is about to witness in the next couple of years. However, we are also aware of the view that seeing a branch is a different comfort and we will certainly expand our branch presence to close to 90 by the end of the next financial year.
Which segments will you focus on?
Our focus continues to be retail, on both the asset and the liability sides. Our focus on liabilities will be on granular deposits, fixed and savings and not necessarily on the bulk deposits. We are looking at serving our 7.5 lakh customers more holistically, which includes various small ticket loans for shopkeepers, small working capital loans, affordable housing loans and home expansion loans. Currently we are starting with around 2,100 employees and there would be 2,500-2,600 employees in the next nine months and probably 3,000 by the next financial year. We are targeting around Rs 100 crore of home loans by the next financial year. As we become a small finance bank, we are initially profiling all our customers according to various requirements. We will be targeting loans which is around Rs 10-15 lakh and even loans in the range of Rs 2-3 lakh.
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How many touchpoints will you have?
Each branch will have three to five banking correspondents. They are exclusive banking correspondents who would deliver a similar banking experience as a bank branch. So the touchpoints are likely to be upwards of about 1,500 where our customers can get all basic banking services for the same comfort as a bank branch probably for a lower waiting time.
What are the benefits of converting into a bank?
In micro finance, it is a simple unsecured loan which has to constitute 85% of our portfolio. It did not give us a bandwidth in terms of having a 30% of home loans, probably a 30% of secured working capital loans. Under the micro-finance business model the focus is on accessing the customers for the standard loans you are catering to the customer base but an effort did not go in terms of understanding other requirements of the customer, mainly because we did not have any other product to offer. The banking platform enables us to provide various products to the customer. Since we know the intent of the customer, having transacted for around three to five years.
Will you be able to compete with existing banks on the lending rate front?
Currently our cost of borrowing, on a weighted average basis is closer to 12.5% and the cost of operations is around 7% and therefore we are lending at 23%. As cost of borrowing fall owing to deposits, which even at 9% is 300 basis points lower than the existing rate, we will plan to transmit the pricing advantage to the customer.