May consider applying for universal bank licence in 2 years: Sarvjit Samra

We achieved an 8 per cent growth in deposits on a quarter-on-quarter basis, maintaining a retail-centric focus, said Sarvjit Singh Samra, MD & CEO, Capital Small Finance Bank

India’s first small finance bank (SFB) is aiming to apply for the universal bank licence in the next two years. In a virtual interview, Capital Small Finance Bank Managing Director and Chief Executive Officer Sarvjit Singh Samra tells Harsh Kumar that the SFB will continue to expand its presence beyond the northern part of India in the upcoming financial year. Edited excerpts:

 

Q. What are your observations for Q3FY25, and what is your outlook for the full year?

 

When we review the results for the third quarter of the current financial year (Q3FY25) vis-à-vis those in previous financial years, we notice that due to our significant presence in rural and semi-urban areas, and the effects of seasonality, our advances have typically seen a slight decline during this period. However, this quarter has shown a different trend, with strong momentum in disbursements across all segments. We recorded disbursements of Rs 737 crore, marking a remarkable year-on-year (Y-o-Y) increase of 92 per cent. This reflects our ability to overcome past barriers associated with our business model, and the geographies in which we operate, and we are optimistic about sustaining this growth moving forward. Additionally, our cost of deposits remains steady at 5.9 per cent for the current quarter, consistent with the previous quarter. It appears that we have reached a peak in our cost of deposits, which I believe is appropriate for our service model.

 

We achieved an 8 per cent growth in deposits on a quarter-on-quarter (Q-o-Q) basis, maintaining a retail-centric focus. Retail deposits now comprise over 93 per cent of our total deposits. Our CASA (current account savings account) ratio has improved, reaching the 10 per cent per cent mark by the end of Q3FY25 after a previous decline. The decline in CASA percentage was noted during FY24, but we are seeing positive changes now.

 

Q. What kind of competition are you facing from other SFBs, and how are you tackling it?

 

I believe that competition is inherently beneficial, as it helps differentiate those who truly stand out. At Capital SFB, we have already identified our niche and follow a philosophy of contiguous branch expansion to build a robust retail franchise on both asset and liability sides. Our focus is purely on retail.

 

By expanding our branches contiguously, we ensure that our trust extends to new customer segments. Our approach includes local hiring and providing relationship managers for our middle-income customers, along with a comprehensive product suite accessible through a single-window service, even in the most remote rural areas. This strategy instils confidence among our customers, assuring them that their risk and financial needs will be met competitively.

 

In this context, I see significant opportunities as the middle-income group in the country continues to evolve — not just in size, but also in diversity.

 

Q. What is your expansion plan for the coming years?

 

Regarding our presence, while we currently have a strong foothold in northern states, particularly Punjab and Haryana, we are actively looking to expand our branch network across the country. Since our transformation from a local area bank to a small finance bank, we have made strides in extending our reach beyond just five districts in Punjab.

 

We have begun deepening our presence in Haryana, mirroring our successful model in Punjab. Currently, we operate in five northern states and two union territories, including our recent addition of Jammu in J&K. Our aspiration is to become a prominent player in India’s banking sector while maintaining our core principles.

 

We are committed to continuous expansion, adding states and maintaining our focus on the middle-income group for both asset and liability growth. We believe that our proven business model can be replicated successfully as we continue our journey.

 

Q. What is the update on the universal banking licence?

 

While we aspire to become a universal bank, our current focus is on our existing business model, which presents ample growth opportunities. We believe that aspirations are important, and we have met all the necessary guidelines, including keeping our non-performing loans (NPL) below one per cent. We are now in the process of moving toward this goal and expect to meet all criteria within the next six-to-nine months. After that, we will assess the appropriate timing for applying for a universal banking licence, and the board will ultimately decide if it is the right moment for us to make that move. However, within the next two years, we may be in a position to consider this opportunity seriously.

 

Q. How will you go on unsecured lending and credit card business?

 

Currently, we offer a comprehensive range of products, except for credit cards, as we are not yet involved in the credit card business. Our portfolio is primarily skewed, with 99.8 per cent of it focused on secured lending. While there is significant growth potential in the unsecured lending segment, we do not have any immediate plans to enter this market. Our focus remains on the areas where we have historically operated successfully.

 

However, regarding the credit card segment, we are exploring opportunities. As we continue to grow and enhance our customer base, we are beginning to assess the feasibility of entering the credit card market. It will take some time for us to fully venture into this area, but we are actively working towards it.