Fino Payments Bank, whose Board of Directors in July approved conversion of the payments bank into a small finance bank (SFB), will file an application with the Reserve Bank of India (RBI) in a month or two for the transition, MD & CEO Rishi Gupta told FE in an interaction.
“After the Board discussion and approval from Board of Directors, the application work has started so within a month or by end of this year we should be in a position to apply to RBI,” Gupta said, adding that the payment bank meets all regulatory guidelines on shareholding structure, net worth and fit and proper criteria for the conversion.
Gupta said even after the proposed conversion takes shape, payments business will continue to be the main driver of the bank’s overall business. Payments banks are allowed to mobilise deposits up to Rs 200,000 and conduct payments business but are not allowed to lend.
He said that during the initial few years of being a SFB, Fino would focus on small ticket value loans for customers and working capital loans for merchants. As loan book size increases, gradually the payments bank will start offering higher ticket size secured loans such as housing and vehicle loans.
“Payment business can run like a bullet train. Lending business should be run like a goods train,” Gupta said.
Fino Payments Bank on Wednesday reported its Q2 net profit at Rs 19.5 crore, up 42% on a year-on-year (YoY) basis, led by higher net revenue margins. Its overall revenue rose 18% YoY to Rs 358.6 crore during Q2, whereas overall throughput value rose 43% YoY to Rs 86,568 crore.
Gupta said that Fino’s overall throughput value may rise to Rs 1 trillion in Q3FY24 or in Q4FY24. Its revenue will likely grow 20% YoY during the second half of fiscal, he said, adding that the net revenue margin would continue to grow from 33% in Q2FY24 as the lender focuses to conduct more payment transactions from its own platforms rather than open banking channels.
The payments bank’s deposits rose 45% YoY to Rs 1,226 crore during Q2 and the pace of deposit growth would continue to be in the 40%-50% range in H2FY24, he said. Gupta, however, admitted that there are challenges in mobilising deposits currently because people are choosing to spend more or invest in mutual funds rather than deposits.
Unlike other lending banks, payments banks are constrained in their ability to raise deposit rates as they invest all savings into government securities, thereby creating more challenges in deposit accretion.
Fino Payments Bank, therefore, is engaging more with its merchants and customers to garner deposits, whether it be through more products on digital application, better call centres and pushing for more UPI adoption. 40% of Fino’s customers have become digital users and digital customers tend to keep higher balance than non-digital users, Gupta said. The lender aims to launch a revamped IoS mobile application and a new bank website by Q4FY24, he said.
Lastly, Fino is looking to add between 750,000-800,000 new deposit accounts and about 50,000 new merchants each quarter going ahead. Its overall deposit accounts stood at 90.6 lakh as of September end and merchant base stood at 15.1 lakh during the same period.