Fino Payments Bank will adopt a cautious approach to lending: MD & CEO

Fresh off its RBI nod, Fino Payments Bank plans a cautious but differentiated path as it transitions into a small finance bank-with digital scale, low-cost liabilities and secured lending at its core

Fino Payments Bank (Fino) last week received in-principle approval from the Reserve Bank of India (RBI) to transition into a small finance bank (SFB). Rishi Gupta, managing director and chief executive officer, speaks to Ajinkya Kawale and Subrata Panda in a telephonic interview about the bank’s focus areas, its plans to build advances and a deposit franchise, and its ambition to get the universal-banking licence. Edited excerpts:

 

It took two years to get the RBI nod. Did you have any clarity from the central bank that the nod will come?

 

We had applied two years ago, and we are grateful to the RBI that we have got the nod.

 

What is the mood among the employees and the management? 

The mood is like when India won the World Cup. As a payments bank, we were doing well, but this model offers us more than the pure payments bank model alone. There is scope and there are opportunities. We do not want to follow the approach of SFBs. Our focus will be on looking at how we can create 

differentiation in this model.

 

Most SFBs evolved from being microfinance institutions. But you will be transitioning from a different model. What will be your approach? 

Where we are coming from is different from where other SFBs are coming from. They were largely microfinance institutions. Ours is a payments bank with a digitally advanced, technology-driven network. We start with a high transaction income of ₹400 crore-450 crore per quarter.  Secondly, most of the SFBs have higher branch costs — a fixed-asset kind of model. But in our case, we have a large distribution of merchants across the country. We think of technology first and then build businesses around it. With artificial intelligence (AI) and every other tool, we will integrate as much technology as possible into our processes, operations, assignments, etc. Liability is one of the most important parts of any bank. We start with high liability books at a low cost — around 2 per cent — for ₹2,500 crore-3,000 crore (current accounts savings accounts). That engine will continue to function as we move into the SFB business. From a long-term perspective, we expect an advantage of 300-400, or 350-400, basis points on the cost of our liability books. 

Our relations with clients and customers over many years will help us start the business with a good base.

 

How do you want to build your lending business? 

We want to be cautious about that. We will focus on a few geographies and a few points of contact. We will not open lending in every part of the country. This is our plan as of now. On the deposit side, however, we will continue to grow and build.

We are a liability-first bank. Liability, technology, and distribution are our core strengths. We will continue to build lending on top of that. Are we expecting lending to ramp up very fast? We would not do that. We will make the right decisions and build accordingly.

 

What are your investment  plans when it comes to branch expansion?

 

We are looking at identifying locations and geographies. We would like to start with eight to 10 states in the first phase and then expand. The idea is to go deeper rather than too wide. We have about 120 branches, so we will recalibrate them and see which ones can be more useful for us. We plan to add 40-50 branches per year to start with.

 

Will you do more of secured lending?  

 

I am not saying we will not do unsecured lending. But stress will be on secured lending. Our focus will be more on affordable housing and small- ticket lending products. We will give loans against property. We have not been able to decide on two-wheeler loans. But that is something on which we may take  a call. We have 12 to 18 months to start the bank, so a couple of these decisions will be taken when we get the right people on the team as well.

 

What is the plan on credit cards? 

The secured credit card is a good business line. We would not like to get into the unsecured credit card at this stage. However, we will get into secured credit cards, but maybe not in the first phase of 

our expansion.

 

And how much hiring do you have to do to build your lending side of the business?   

In the first few years, including both field and central office roles, we think 500 to 600 people will be hired. Seventy-five to 80 per cent of those 500-600 people will be in the field, and about 25 per cent of them will be at the corporate centre.

 

Would you raise capital?  

We don’t need capital from a regulatory point of view or on account of our business model. But we may look at some capital raise.

 

Have you identified the geographies you will focus on for lending?   Yes, largely between north to west, and then eventually the south.  

 

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