SFBs can turn into universal banks, say experts at BS BFSI Summit 2023

There is nothing to stop our firm from turning into a Universal Bank, said Ittira Davis, managing director and chief executive officer of Ujjivan Small Finance Bank

Heads of top Small Finance Banks (SFBs) said that they can serve their customer base better if they turn into universal banks. The panellists were speaking at the Business Standard BFSI Insight Summit 2023 on Tuesday.

Talking to Business Standard's Banking Editor Manojit Saha in Mumbai, Ittira Davis, managing director and chief executive officer of Ujjivan Small Finance Bank, said, "There is a roadmap right now which has been set up for the eligibility to become Universal Banks. I think if SFBs fulfil their objectives, I don't see why SFBs can't turn into Universal Banks."

Asked if they are waiting for approval to become Universal Banks, he said, "We have decided at Ujjivan that we will wait for a reverse merger. We will balance our portfolios. This information is in the public domain. There is nothing to stop our firm from turning into a Universal Bank."

Talking about the digital technology inclusion in SFBs in the future, Davis added, "The technology revolution which has happened in the Unified Payments Interface (UPI) space will eventually start happening in our space as well. We believe it will make a significant difference. Digital technology is being used by customers to repay loans and avail loans. It is happening faster than we think. So, technology will enable financial inclusion. We will see this taking place in the next 5-10 years.

On the potential of SFBs to become Universal Banks, Inderjit Camotra, managing director and chief executive officer of Unity Small Finance Bank, said, "SFBs are created to serve underserved and unserved cohorts. Our business serves more than 25 million people directly. SFBs touch the lives of almost 100 million Indians. SFBs punch much beyond their weight."

"If we stay true to the course and become pliant and robust institutions, we will prove our mettle," he added.

Talking about the power SFBs have, Sanjay Agarwal, promoter and MD & CEO of Jaipur-based AU Small Finance Bank, said, "We are running a bank in the sense of private enterprise, but beyond that, there is a responsibility on us that it is a depositor's money; it is public money; it is a public platform. So we all have to be sensible enough to act accordingly."

"If one had asked me this question three years ago, I would have said, no, you need a universal license to be a really powerful franchise or a relevant franchise. But now, after six and a half years, SFB itself is very powerful, in the sense that we all got the license."

"Customers don't care if you are a Universal Bank or SFB. They care about the product and service," he added.

On the struggles that SFBs face during the pandemic, Ajay Kanwal, managing director and chief executive officer of Jana SFB, said, "All of us in the last six-seven years, and especially navigating Covid-19, as scheduled commercial banks, have come out to show that we are well-done institutions. There is always scope for improvement, but all SFBs have been through a tough time."

"I do think that being a Universal Bank would certainly help us on the branding side and the liability side, much more than the asset side. And that is a very important piece of banking. But I believe we should convert to universal banks, and we should be allowed to convert to Universal Banks."