AU Small Finance Bank received in-principle approval from the Reserve Bank of India on Thursday to transition into a universal bank. Sanjay Agarwal tells Kshipra Petkar that he is not a big fan of third-party sourcing. Excerpts:
The approval for universal licence has been given on the condition that 22% of promoter’s stake to holding company. By when do you expect that to complete?
We haven’t gone and figured out the whole legality or modality. We need some time to really figure out, but the RBI has given us 18 months. So, I think they would have thought that it can be achieved in this time frame.
You will be competing with other major private sector banks. What will be your strategy?
I would say that we are still competing with them anyway, but without arms and ammunition. This gives us ammunition that we are as good as you. I think we will be giving them more competition in deposits because we will be pricing them higher. I think the public in large will accept us as we are giving them better rates, better products and better service.
What are the growth aspirations of the bank going ahead?
The team has decided that anything around twice to the nominal GDP, should be our target.
Do you estimate the growth in loans and deposits to be at the same pace given the current environment?
I think there would be a lot of momentum in our favor because of this announcement. But I think we need to take cognizance of the fact that the markets are tough and the environment is uncertain. So, we can’t take bold calls because the idea is to really build a balance sheet which can sustain over the period.
In terms of your loan book, is there any particular segment that you really want to focus on going forward?
Retail and commercial banking will take centre stage. We want to really take care of our MFI and credit card business so that we can bring the bank on track.
You mentioned two segments – MFI and credit card – that you will focus on. But banks are still seeing some stress in them. What will be your game plan?
A lot of improvement has already happened in the MFI segment. We are doing incremental business on the credit guarantee scheme now. By next quarter, I strongly believe that you will see decline in these slippages. We have already done course correction in the credit card book.
A new team has come in and we have tightened our underwriting rules. We are focussing more on our collections.
What are the branch expansion plans of the bank?
We want to focus on 50-75 branches every year.
Last year, you received the AD-1 licence. What has been the progress in that space?
We are doing remittances, meeting customers such as, exporters and importers. So, things are still at a very early stage because first we need to build internal infrastructure, get the right people, and then, launch products. So, it will take some time, but I think we are on the path.
Will you take the co-lending route aggressively once you become a universal bank?
No. While we can explore the option, I am not a big fan of third-party sourcing.