The managing director of Bajaj Finserve tells Shobhana Subramanian that there is a strong case for letting large corporates into the banking space, with licences being awarded on the basis of track records

He doesn?t much care for life in a big city. So although work brings him to Mumbai every now and then, Sanjiv Bajaj doesn?t stay a moment longer than he needs to; it?s simply too noisy and chaotic. In contrast, Pune, where he grew up, is quiet, and a place where he can think straight. You can imagine, then, how difficult it is to catch up with the managing director of Bajaj Finserve for lunch with FE. But the wait has been worth it and the timing couldn?t have been better. The Usha Thorat committee?s recommendations on non-banking financial companies (NBFCs) have been made public, as have the Reserve Bank of India?s (RBI) draft guidelines for new banking licences. The younger son of Rahul Bajaj and brother of Rajiv Bajaj, who?s as balanced as they come, probably because he?s so much into basketball, will need to put his mind to both; he already owns an NBFC?Bajaj Finance ?and is eyeing a bank. Although being in the two-wheeler business was fun, Bajaj is enjoying piecing together the groups? financial services strategy, he tells me.

We?re at the India Jones at the Mumbai Trident because Bajaj had said he would like to eat Chinese, Thai or Italian cuisine, and I figured two out of three would be good going. The restaurant, as welcoming as always, is strangely empty on this Tuesday afternoon, which is possibly why the staff has remembered my request for a corner table; I?m glad they have. Neither of us wants to be too adventurous, so it?s dumplings, a few stuffed with prawn and coriander, the rest filled with chicken for starters. And some soup ?crab meat for me and sweet corn chicken for my guest. Bajaj, I discover, stopped playing basketball a few years ago because the courts were hard on the back and the knees, but still swims and gyms regularly and, when he can, watches Formula One. But he has always been big on sports and so it?s not surprising that his daughter has taken to badminton while his son prefers football. That?s the big plus of living in Pune; there?s enough time to play tennis with his son and to catch up with friends. More than anything else, though, he believes the peace and quiet leave his mind uncluttered.

Right now, he is relieved that the Usha Thorat committee?s suggestions on the way NBFCs should be run and regulated is not going to mean too many changes at Bajaj Finance. For one, the firm is already well-capitalised and so the 12% core capital rule, as also the higher risk weights for certain sectors will be no hindrance at all. Neither will the new liquidity norms. ?We?ve built our business without trying to benefit from any regulatory arbitrage because you can?t control these things. I?m not comfortable building a business model that can be severely impacted by an external force,? says Bajaj, exuding a quiet confidence.

Neither is he comfortable with clutter, and so no longer lugs around a laptop, having traded it for an iPad, which he says packs everything he needs. In fact, his wife thinks he?s too organised, but that?s default status as far as Bajaj is concerned. Not that he doesn?t switch off from work; a brand new home theatre system allows the extended family?he lives with his parents?to catch a film now and then. Of late, Bajaj has been reading a lot, a recent favourite being the cycling champion Lance Armstrong?s It?s not about the bike: My journey back to life. And then there are all his friends with whom he went to school and college; Pune, he tells me, has many more happening spots.

Not that business is dull despite interest rates having entered an altogether new orbit. Bajaj himself was pleasantly surprised at the tremendous turnout seen on the Independence Day weekend. Being the realist that he is, he doesn?t doubt for a moment that there could be a bit of a slowdown. But he also knows that, this time around, the balance sheet will not take the kind of hit that it did in 2005-06 when the exposure was less diversified and two-wheeler loans formed the bulk of the portfolio. More importantly, the business isn?t over-leveraged?there?s a greater reliance on banks for resources rather than on retail deposits. Bajaj is hoping that RBI will soon allow NBFCs to tap the overseas markets for lending to segments other than infrastructure.

A bank licence would, of course, make life that much easier, helping bring down the cost of borrowings through a liabilities franchise, albeit over a period over time. And as Bajaj points out, it would help strengthen the customer base; after all, everywhere in the world it?s the banking system that is seen as more secure than any other. He believes there is a strong case for letting large corporates into the banking space with licences being awarded on the basis of track record. ?Today because licences are so treasured, there are those who, rather than build up a big franchise the way an HDFC Bank has done, limit it only to a small business opportunity. It?s better to give out larger number of licences and then monitor the banks. So, ideally, RBI should allow more players into the system but have the checks and balances in place,? he says, pointing out that almost all the individuals who were given licences in the past failed to do much with them.

Even without being a bank, however, there?s a strong-enough value proposition in an NBFC, Bajaj tells me, as the main course arrives; pan-fried noodles with vegetables and chicken in a light sauce with cashew nuts. For one, he points out, NBFCs can be niftier than banks; they are able to carve out strong niches and can keep down the operating costs. ?It?s just a question of finding the right focus,? he explains, supporting the additional regulation and larger capital requirements suggested by Thorat?s committee because, by and large, NBFCs can continue do what they?ve been doing. For sure, he has a lot on his plate, starting with the wealth management business, which was recently soft-launched. A 40-member team is working on the initiative across four cities, targeting a client?le with an annual household income of between R15 lakh and R50 lakh. It?s been a learning experience for the entire team, including Bajaj, who tells me almost every customer expects that he will ultimately be sold some product or the other and is extremely surprised to find that it doesn?t happen. ?What we?re attempting to do is more in the nature of an advisory service by which we help the customer assess his risk profile and figure out his asset allocation patterns, in return for a fee,? he explains.

We decide to skip dessert and ask for some freshly brewed coffee, instead. Bajaj says he?s in no hurry to kickstart the asset management piece?for which an in-principle licence has been obtained from Sebi?given that the mutual fund industry has been through a bit of a rough time this past year. How does one hope to gain market share in an already crowded space at a time when the retail investors seem altogether disenchanted with equities? Clearly, it?s not easy, especially since distributors have been disincetivised, but he feels some kind of blueprint would be ready by the middle of next year. The strategy for the long-term, Bajaj believes, would ultimately lie in catering for the retail customer much like it has happened in the case of Bajaj Allianz, the life insurance venture. There again, Bajaj is not in too much of a hurry to grow the business, having consciously decided to go slow and not burn capital at a time when the going is tough. Does he miss being at Bajaj Auto? He had a good time there, he says, but is having as much fun with the financial services piece. And he?s in no rush to get anywhere, not wanting to miss out on any time that he can get with his family. At 41, he has all the time in the world.