Fino Payments Bank, whose board on Friday approved transitioning to a small finance bank (SFB) model, could apply to the Reserve Bank of India (RBI) for a SFB licence by H2FY24, CFO Ketan Merchant told FE in an interaction.
“The next step would be application to the regulator…If you ask me, this entire process from here on can anyway take around 24 months in terms of operation starting. We are looking at this fiscal in terms of progressing our SFB persuasion with the regulator,” Merchant said.
Fino Payments Bank is the first player in the payments bank space to transition to an SFB. According to RBI guidelines, payments banks who have been operational for five years could apply for an SFB license. Merchant said while Fino has been able to crack the payments bank business model over the last six years of operations, transitioning to an SFB provides it far more opportunities in terms of accepting deposits upwards of Rs 200,000 and also operating in the lending space.
Upon conversion to SFB, Fino will continue its focus on fee-based income, the CFO said.
“We have approximately Rs 1,230 crore of revenue (in FY23), and of that Rs 1,150 crore is essentially transaction of fee-based revenue. Today, none of the SFBs will have this kind of transaction revenue,” he said, adding that the payments bank is aiming for over 20% year-on-year (YoY) growth in its revenue for the current fiscal.
Secondly, unlike other SFBs, which majorly extend microfinance loans, Fino would focus on lending to its existing merchant base of 1.44 million, which it aims to increase to 2 million over the next 2-3 years.
“We are in no hurry to build a lending book because our margins or our high margin products of CMS and CASA are going and expected to grow. So we will only use lending to complete the product suite and not become a lending bank. And we’ll continue to focus on service and payment services,” he said.
Further, Fino will be looking to extend retail loan to its existing customers. Currently, Fino’s CASA base is around 8.3 million and is expected to grow to around 20 million in 3 years. The lender will also look to offer auto loans and loan against property products after it receives an SFB licence from the central bank, and these products will also be facilitated through a digital channel, the CFO said.