We are open to evaluating the universal bank opportunity

Fincare Small Finance Bank (FSFB) has recently reached an MoU with National Housing Bank (NHB) to facilitate the credit-linked subsidy for eligible borrowers. The Pradhan Mantri Awas Yojana (PMAY) Scheme under the Ministry of Housing and Poverty Alleviation is a critical programme, which the Government of India (GOI) is implementing in mission-mode. SFB is mulling to avail itself of the universal bank opportunity. "We are open to evaluating the universal bank opportunity as and when it arises," FSFB Managing Director and CEO, Rajeev Yadav, tells in an exclusive interview with Bizz Buzz

Your views on the RBI internal working group report on issuing banking license to corporates and large NBFCs?

As mentioned by the RBI Governor in one of the interviews, since this is still a working paper and not formal guidelines yet, we shall wait to see what form and shape the recommendations shall take. Since India is a vast economy with diverse customer segments and banking needs, expansion of pool of banking services shall only benefit the customers and create more opportunities for entrepreneurship and employment and that is always welcome.

Would you want to transform into a universal bank?

We are a fairly niche bank and constitute a tiny part of the whole. Ultimately, it is about an organisation's comfort, risk appetite and ability to deal with certain kind of customer segments. In this regard, we are fairly comfortable with the markets we operate in. We are on a journey of building a best-in-class digital bank in the SFB space and we see a large opportunity in this segment. However, we are open to evaluating the universal bank opportunity as and when it arises.

How was this year for fincare? How did your business and operations pan out amidst the pandemic?

Post March, growth has been one of the key parameters followed closely by portfolio quality and then customer experience and digitisation. In normal times, our growth would have been 40-50 per cent in the current financial year. In the past three years, our NPA (non-performing asset) was one per cent and ROE (return on equity) was over 20 per cent. FY20 has been a tough year for all businesses, but we have moved from the 'survival' phase to the 'normalisation' phase. In the coming quarter, we will stand benefitted from the changed post-pandemic world. We expect the bank to grow by 10-15 per cent in the first half of FY21. We are at 95 per cent of our collection efficiencies.

The segmentation and selection of our customers, most of whom are in the rural or semi-urban areas, has helped us in doing smarter collections. Now, we are in the last phase of delinquency management of customers who have not paid us for one to three months. That should last for another three months. Collections are now headed towards normalisation.

What was the most challenging aspect for business during this time? What enabled you to keep afloat during these challenging times?

Banking was categorised as an essential service, and our banking outlets have remained operational with our business teams on the ground, ensuring banking access for all customers. It was indeed important for us to focus on the safety of our staff and customers. During the lockdown period, our teams in administrative offices and sales units were advised to work from home. Given the digital-first philosophy of the bank, despite the lockdown, communication, engagement and productivity of staff has remained business-as-usual. We believe that the bank had the right levers in place to come out stronger from this challenge.

Digital banking has become a new mantra. How has your bank adopted this?

The banking sector has witnessed tremendous progression in adoption of technology and the use of data and artificial intelligence (AI) to create compelling customer experience. The manner in which financial institutions engage with consumers is rapidly transforming the entire customer journey. By adopting an innovation-oriented culture, supported by the quality use of data, the bank is well positioned to deliver customised services and solutions that create revenue streams far beyond what was possible in the past.

This was the year of accelerated automation for the bank. The bank fully automated the periodic recon of all payment channels, which is carried out multiple times in a day. We also carried out deeper integration between our core banking system and various other systems, in order to avoid duplicate data entry, thereby saving precious human effort.

As a bank, we have a wide spectrum of products, both on the assets and liability side and a wealth of data. Using AI and machine learning (ML), we are leveraging this structured data to find insights, cross-selling opportunities, building credit underwriting algorithms etc. AI is also helping us explore the full potential of the existing data. For example, NLP for WhatsApp and chat banking, computer vision for extracting information from documents, comparing photos etc. Such initiatives enhance our compliance posture as well. We have also started automating a large number of mundane tasks using a combination of robotic process automation (RPA), application programming interface (API)-based integrations, business intelligence (BI) systems and ML.

With the government's push to strengthen MSME and MFIs, what has been your experience with lending?

The government and the RBI have addressed many concerns by announcing industry-specific measures, injecting liquidity in the financial system, providing taxation-related reliefs, DBT, MNREGA wages, agri-produce procurement, loan moratorium, among other steps. The bank is already a steady provider of credit to micro entrepreneurs. We are also studying various schemes of the government such as Mudra and PMAY and increase our product spectrum to cater to new customers in the micro and Small segments.

Any new initiatives/products/services offerings that are planned in the coming financial year!

The bank has a large number of digital initiatives, broadly divided into five areas. These include product innovation, customer experience, new customer acquisition, cost reduction and compliance. The bank is evaluating a full range of products/offering using digital, such as bill payments, wealth management, 3-in-1 account, cards, rewards and loyalty products in the coming year.

To assist growth of balance sheet, do you have any plans of raising capital in 2021?

We keep raising funds through rights issues. We will be doing those exercises over the next six to nine months and then depending on the guidelines, we will be chalking out a path for listing of the bank. As per the present guidelines, we have to list the bank by September 2021. We will be working towards that. The amount will depend on how much we raise through the rights issues before we get there.