‘We will expand pan-India digitally’

We will also have more opportunities to lend at a lower rate in terms of government-sponsored schemes and availability of refinance.

Shivalik Small Finance Bank (SFB), the first lender to transition to the model from a cooperative bank, expects to grow its loan book by about 49% over the next 12 months to Rs 3,050 crore, MD & CEO Suveer Kumar Gupta told Shritama Bose. The bank’s collections have so far been unaffected by the Covid surge, but it will watch how things evolve from here, he added. Edited excerpts:

As you make the transition from an urban cooperative bank to an SFB, what are your immediate priorities?

We have already begun operations as an SFB. Our immediate priorities relate to certain aspects of banking that are different for a cooperative bank and a commercial bank, foremost among them being compliances. Our first priority is to stabilise them. As far as the customer-facing aspects are concerned, there’s not much of a change from how we delivered services as a cooperative bank. We have ensured that all our operations are handled seamlessly and the customer does not face any issues because of this transition. The second focus is on the digital side. We are a very digitally focused bank and we plan to acquire digital-only customers. This is especially for millennials and young people who are more comfortable doing things digitally. We are also developing tech, which will help us deliver services to the underbanked, especially in rural areas. We are coming up with an app designed with the rural masses in mind, which will be in Hindi. Physically, we would like to expand in areas where our presence is already high — in the states of Uttar Pradesh, Uttarakhand, Madhya Pradesh, Rajasthan, Haryana, Punjab and Himachal Pradesh. We would also like to expand pan-India digitally by means of video KYC.

Will you be adding more products to your platform?

As of now, we offer a complete bouquet of retail banking products, both on the deposit side as well as the lending side. Our products are specially suited to our target customer base, which is the MSME (micro, small and medium enterprises) sector — small businesses and industries as well as local kirana shops. Becoming an SFB opens up more areas of banking to us. On the deposits side, we would be coming up with tax-saver FDs (fixed deposits) for senior citizens, and specialised deposits for millennials and women. We would be soliciting government and institutional business for deposits. On the lending side, apart from offering all our loan products digitally, we would expand on the agri side and do lending against e-warehouse receipts and also finance allied activities, such as dairy farming. As a commercial bank, we can also make use of refinance schemes. Our microfinance book is now at 10%, which we would like to grow to 15-20%. We’d also like to offer loans against FDs and insurance policies, both of which can be done digitally. We already have a few fintech partnerships for loan sourcing and we will be looking for more of those as well as work with business correspondents.

What is your cost of funds right now and how do you expect it to change?

At the moment our cost of funds is between 6 and 6.5% and we expect it to fall as more CASA (current account savings account) becomes available to the bank in terms of government and institutional deposits. We will also have more opportunities to lend at a lower rate in terms of government-sponsored schemes and availability of refinance.

What kind of growth in loans do you expect over a one-year period?

We are currently at a loan book size of about Rs 2,050 crore and we are targeting to grow it to Rs 6,000 crore in the next four years. In the next one year, the book will grow by Rs 1,000 crore. We are planning to add 40 additional customer touch points, which will include branches, ATMs and business correspondents.

Given the current Covid surge, how much of a problem are you facing in terms of repayments?

Last year, we had offered the moratorium to all our customers. Our approach was to engage with customers and help ensure good credit behaviour. Where required, we also offered top-up loans to help them tide through temporary difficulties. By the time it got lifted, 80% of our customers had started to repay. By March, our collections were almost back to pre-Covid levels. But the second wave has hit us in April and it’s a little early now to say how things will turn out. At the moment our collection rates are fine, but it’s hard to say where things will go from here.