AU Small Finance Bank, which started operations in April 2017, has benefitted from demonetisation and implementation of the GST, Sanjay Agarwal, MD & CEO, told Shamik Paul. The lender plans to have a deposit base of about Rs 5,000 crore by March 2018, which is 40% of its assets. Edited Excerpts:
Since your launch in April, how has your experience been?
A lot is happening in the banking sector, and most of it is in a positive direction. We benefitted both from demonetisation and implementation of the GST. I don’t know if there will ever be a better time than this to start a bank. In the last five months, we have had an amazing run. We have opened around 1.25 lakh accounts, we have raised Rs 1,400-1,500 crore as CASA deposits at about 6.75%, we have disbursed more than Rs 3,500 crore of loans and have started 400-plus branches. After the GST, SMEs and MSMEs are building a larger balance sheet. They need more credit from the formal banking sector, and that has opened up a new avenue for us.
Deposits at banks swelled after demonetisation. Have you been able to take advantage of the situation?
As you know, a lot of money came into the banks after demonetisation, and for various reasons, the money remained with the banks. The money was lying with the public sector banks and the private sector banks at very low costs. Once we started our bank in April, that money started chasing us. We are offering around 6% interest. That is higher than the 3.5-4% that most other lenders. I expect the momentum to continue.
What is your outlook on your credit and deposit growth?
We believe that our assets will grow by 40% this fiscal, and we will be able to raise 30-40% of it from CASA and retail term deposits. When I say this, I am looking at a cost of 6.5%. I believe if I can price it higher, I can even do even 60-70%. But we want to maintain a balance and want to build a long-term franchise that is driven not only by the interest rate. By March 2018, we should have about Rs 5,000 crore of deposits, which would be about 40% of the Rs 14,000-15,000 crore of assets we would have.
What is your plan for branch expansion?
We have permission to open 305 branches. So five new branches will come up during this fiscal. We will also start 100 unbanked branches by March. We are looking to launch the business correspondent model too. We also have 116 asset centres. All put together, we will have more than 525 touch points by March 2018.