Starting with 26 branches, Fincare Small Finance Bank wants to be able to fund at least half its balance sheet through deposits, managing director and chief executive officer Rajeev Yadav tells Shritama Bose.
Starting with 26 branches, Fincare Small Finance Bank wants to be able to fund at least half its balance sheet through deposits, managing director and chief executive officer Rajeev Yadav tells Shritama Bose. The bank will be looking at a balance sheet size of Rs 2,000-2,500 crore by the end of FY18, he added. Excerpts:
You have just started operations as a bank. How have you gone about the launch?
We did a commercial launch on September 1. We had been in a soft-launch phase in the 45 days prior to that. So it’s been a very short window, but we’ve been pleasantly surprised overall in terms of the customer response and our ability to offer products at a market rate. To answer your question, we are live in 26 branches as of today. We have our microfinance branches which were already existing earlier which, over a period of time, we will convert into banking outlets. Overall, we have rolled out technology, we have rolled out internet banking, mobile banking, and tab banking, which our employees carry. We are just short of Rs 300 crore of deposits.
What would the next stage of expansion?
We want to have 500 banking outlets this financial year. We want to fund at least 50-60% of our balance sheet by deposits in this financial year. We’ll possibly have a balance sheet size of about Rs 2,000-Rs 2,500 crore by March-end and we want to fund at least half of that by deposits. We’ll gradually start offering all the products. We are offering savings accounts, current accounts, lockers and fixed deposits, but we have to do more of that. We’ll first build a brand recognition for our bank and then create a value proposition for our target segment.
We are already present in seven states and one union territory. We have pretty much covered the western and southern states. We’re definitely looking at the north and we’ll be looking at adding some banking outlets in this financial year. As for the east, we’ll have to explore in the following year; it’s not part of our initial plan.
What are the credit products you are offering right now?
On the asset side, we do microfinance loans, we do loans against property, we do loans against gold, we do what we call institutional finance – loans to institutions with loan values between Rs 1 crore and Rs 20 crore. We are going to add overdraft lines to our SME (small and medium enterprise) customers and we’ll also add an affordable housing product.
What portion of your asset book will be microfinance loans?
Right now, we have microfinance loans constituting about 93% of the total loan book. By the end of the first financial year (FY18), we should be able to bring it down to 80%.
To what extent does your cost of funds fall as a result of becoming a bank?
Clearly, we can raise deposits at a lower cost of funds. As an NBFC (non-banking finance company), our cost of funds was about 10-11% when we converted. Now, depending upon product design, we can garner some savings account corpus at 6-7%, which we are offering right now. On term deposits, we are offering 7-9%. While on the one hand, there is a reduction in the cost of funds, our effort to raise that money is much higher than what we had to put in while raising funds as an NBFC because that was more of a treasury operation. The technical coupon rate that we pay on the money that we raise is lower, but there is a cost to it. So overall, we may remain at the same number in the short term till the cost of operation stabilises as we reach scale.
Your market borrowings will also turn cheaper?
Right now, we are not borrowing much from the market because we are waiting for scheduled status for the bank.
Do you have a timeline for listing?
We would be looking at an IPO (initial public offering) somewhere three to four years down the line.