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Small finance banks on deposit mobilisation spree on 1st year of operation

SFBs offering up to 100-150 basis points higher interest rate on term deposits over market rates

Namrata Acharya  |  Kolkata 

Bank, Financial institutions, Banks
Representative image.

With eight out of ten now fully operational, aggressive deposit mobilisation in the first year of operation has turned out to be the key strategy for almost all the new entities. In addition, the new age are betting big on technology to reduce the cost of operations.

All the operational are offering up to 100-150 basis points higher on term over market rates. This apart, some of the are also eyeing bulk or corporate The idea behind the move is to replace high-cost taken by as microfinance institutions with relatively low-cost

"Our highest on fixed is around 8 per cent and is, in general, one percent higher than the prevailing market rate. We are looking for both bulk and retail and aiming to replace high-cost with low-cost We are also raising through certificates of (CDs)," said Samit Ghosh, MD and CEO, Ujjivan Small Bank.

The highest offered by the Varanasi-based is 8.5 per cent on term The bank has set a target of mobilising at least Rs 2,000 crore by the end of March 2018.

"We have a two-pronged strategy for deposit mobilisation. First, we are focusing on having high-value bulk from the corporate sector. We are eyeing entities like high net worth individuals (HNIs), non-banking companies (NBFCs) and regional rural for that. For retail deposits, we are looking at our existing microfinance customer base, as well as their family members and neighbours. This apart, a new set of customers in urban and semi-urban areas, who traditionally have been keeping money in banks, are also on the radar,'' said Govind Singh, MD and CEO, Bank. 

The bank is looking to digitise its entire spectrum of transaction, including transactions in rural areas, in the next few months said Singh.

The Kerala-based Small Bank, which has completed close to six months of operation has so far mobilised close to Rs 1,040 crore The bank has been offering a high interest of nine per cent for above one year and less than three years. At 9 per cent, it is one of the highest offered by a bank at present. In view of the falling scenario and in alignment with the rates offered by other small banks, is planning to review its interest rates next week, said K Paul Thomas, MD and CEO, The bank has also rolled out tab banking for smoother transactions in rural areas and is looking to diversify its loan portfolio in sectors like small and medium enterprises (SMEs), housing and agriculture

Suryoday Small Bank, which has been offering an of 8.75 per cent for a period greater than 24 months and less than 36 months, is looking to continue offering higher interest rates until its deposit pool reaches around Rs 500 crore. The bank is looking to reduce its operational cost by at least 100 basis points through the use of tab banking, according to R Baskar Babu, MD and CEO, Bank.

"Technology will play a big role in our day-to-day operations. We have found out that nearly 75 per cent of our customers have at least one smartphone user in the family. We are aiming to digitise all transactions and route it through tab banking. This should reduce the cost of operations by at least 100 basis points,"' said Babu.

While offering high rates on interest on deposits, most of the are keeping their on loan products on a higher side. At present, the for most of the is between 14-16 per cent, according to a report by Kotak Institutional Equities. The offered on savings accounts for most is around 6 per cent, except Ujjivan, which has been offering a 4 per cent

First Published: Wed, October 04 2017. 16:53 IST
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