Shivalik Small Finance Bank (SFB), the first lender to transition to a cooperative bank model, plans to grow its business portfolio by around 49% over the next 12 months to Rs 3,050 crore, the director said General and CEO Suveer Kumar Gupta at Shritama Bose. . The bank’s collections have so far not been affected by the surge in Covid, but it will follow developments from here, he added. Edited excerpts:
As you move from an urban cooperative bank to an SFB, what are your immediate priorities?
We have already started our operations as SFB. Our immediate priorities relate to certain aspects of banking that are different for a cooperative bank and a commercial bank, the first of which is compliance. Our first priority is to stabilize them. When it comes to customer-related aspects, there isn’t much change in the way we provide services as a cooperative bank. We have ensured that all of our operations are handled transparently and that the client has no issues as a result of this transition. The second emphasis is on the digital side. We are a very digitally focused bank and we plan to acquire digital-only customers. This is especially aimed at millennials and young people who are more comfortable doing things digitally. We are also developing technology, which will help us provide services to the underbanked, especially in rural areas. We are offering an app designed with the rural masses in mind, which will be in Hindi. Physically, we would like to expand into 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 through KYC video.
Are you going to add more products to your platform?
Now we offer a full package of retail banking products, both on the deposit side and on the loan side. Our products are specially tailored to our target clientele, which is the MSME sector (micro, small and medium enterprises) – small businesses and industries as well as local kirana stores. Becoming SFB opens up more banking areas for us. On the deposit side, we would offer FDs (fixed deposits) for seniors and specialized deposits for millennials and women. We would solicit government and institutional companies for deposits. On the lending side, in addition to offering all of our lending products digitally, we would expand to the agricultural side and do electronic warehouse receipt loans and also finance related activities like dairy farming. As a commercial bank, we can also use refinancing programs. Our microfinance book is now at 10%, which we would like to increase to 15-20%. We would also like to offer FD loans and insurance policies, both of which can be done digitally. We already have a few fintech partnerships for loan research and we will research more and work with business correspondents.
What is the current cost of your funds and how do you expect it to change?
Right now our cost of funds is between 6% and 6.5% and we expect it to decrease as more CASA (current account savings account) becomes available to the bank in terms of deposits. government and institutional. We will also have more opportunities to lend at a lower rate in terms of government funded programs and availability of refinancing.
What type of loan growth do you expect over a one-year period?
We are currently at a business ledger size of around Rs 2,050 crore and aim to grow it to Rs 6,000 crore within the next four years. Over the next year the pound will increase by Rs 1,000 crore. We plan to add 40 additional customer contact points, which will include branches, ATMs and sales correspondents.
Considering the current outbreak of Covid, how much of a reimbursement problem are you facing?
Last year, we offered the moratorium to all of our clients. Our approach was to engage with customers and ensure good credit behavior. If necessary, we also offered them complementary loans to help them overcome temporary difficulties. By the time it was lifted, 80% of our customers had started repaying. In March, our collections were almost back to pre-Covid levels. But the second wave hit us in April and it’s a bit early now to say how things are going to go. At the moment our collection rates are good, but it’s hard to say where things are going to go from here.