Capital Local Area bank eyes FY17 to start off as small bank

The Jalandhar-based bank plans to raise its net worth to Rs 120 cr by the end of this fiscal

Having secured RBI's approval, Jalandhar-based Capital Local Area Bank plans to start operations as a small finance bank from the next financial year as it eyes a total business size of Rs 6,700 crore with 110 branches by 2020.

"We have plans to work as a small finance bank from 2016-17," MD Sarvjit Singh Samra told PTI today.

With net worth of Rs 100 crore as a minimum requirement for a small finance bank, the bank plans to raise its net worth to Rs 120 crore by the end of this fiscal.

"At present, our net worth is Rs 90 crore. To work as a small finance bank, Rs 100 crore is a minimum requirement. Therefore, we have decided to come out with a rights issue for our existing shareholders whereby we will be raising Rs 18 crore. With the funds and profit, we expect by March 2016, bank's net worth will reach Rs 120 crore," he said.

RBI has granted approval to 10 entities, including Capital Local Area Bank, to operate as small finance banks.

The mandate for a small finance bank is to provide basic banking services like accepting deposits and lending to unbanked sections such as small farmers, micro business enterprises, micro and small industries and unorganised sector entities.

Operating as a private bank for the last 16 years, Capital Local Area Bank could expand itself after migrating into a small finance bank.

"The major benefit will be that there will be no restriction on area of expansion. We can expand our network," he said.

Currently, the bank is operating in Punjab's five districts -- Jalandhar, Kapurthala, Hoshairpur, Ludhiana and Amritsar.

"We have prepared a road map to achieve a business size of Rs 6,700 crore by March 2020," he said, adding that at present, the bank's total size of business stands at Rs 2,640 crore comprising Rs 1,000 crore of deposits.

"By March 2016, our total business will grow to Rs 3,000 crore," the MD said, adding that 80 per cent of total business comes from rural and semi-urban areas.

"In the first year of working as a small finance bank, we plan to expand to other districts of Moga, Nawanshahar, Ropar, Bathinda and Patiala. We will also cover UT Chandigarh.

The lender has plans to open 15 branches in 2016-17 and 60 by March 2020.

"Thereafter, we will start expanding to other states such as Haryana, Rajasthan, Himachal Pradesh and Delhi," he said.