Cholamandalam open to tie-ups for payments bank

Plans to shut most branches offering gold loans by end-March

Cholamandalam Distribution Services, which has applied for a payments bank licence, will explore tie-ups if it gets one. The company, a 100 per cent subsidiary of Cholamandalam Investment and Finance Company, would initially tap its own customers under the payments bank model, said  Vellayan Subbiah (pictured), managing director, Cholamandalam Investment and Finance.

“There are four million people we can tap within our own ecosystem. If we get the model working, there is opportunity to grow it beyond our ecosystem. Just reducing the transaction costs with our own customers will be a significant benefit,” he added.

The Reserve Bank of India’s objectives of setting up payments banks is to further financial inclusion by providing small savings accounts and payments services to the migrant labour workforce, low-income households, small businesses, etc.

Cholamandalam is shutting its gold loans business, which has a portfolio size of Rs 62 crore, due to “regulatory uncertainty”. “The regulations continuously change in this business. We have always been very conservative from that perspective. By the end of March, we will close down most of these branches offering gold loans,” said Subbiah.

The gold loans business was started about three years ago. “If the gold loan branches can be converted into other branches, we will do so or we would close them. We have 540 branches in our network and an additional 45 branches for gold loans,” Subbiah added.

According to Subbiah, the key focus areas for FY16 will be housing loans and loans to micro, small and medium enterprises (MSME). For the nine months ended December 31, 2014, the company disbursed home loans worth Rs 192 crore, while for MSME loans, the disbursements were Rs 58.9 crore.