Singapore-based DBS Bank, hitherto focusing on the affluent segment, has decided to shed that tag and instead go for mass-market retail (individual) customers.
To woo this segment, it has launched a mobile-only bank. It says this will be completely paperless and branchless, allowing customers to open accounts by using their Aadhaar card, the biometric authentication, at various companies it makes arrangements with. At present, it has tied up with 500 Café Coffee Day outlets.
To expand the customer base, the bank will be offering seven per cent annual interest (no minimum balance required) on a savings account, higher than the five per cent it was offering till now, and free cash withdrawal across all ATMs.
Piyush Gupta, chief executive officer, says the reduced cost in investments with this mobile-only bank will allow them to offer a high savings interest rate and other benefits. At present, the bank’s cost to income is 55 per cent in India. It aims at bringing this down to its global average of 45 per cent.
“We want to build a liability book of Rs 50,000 crore and an asset book of Rs 10,000 crore in the next two to three years on this platform. We are also aiming to have about five million savings accounts in the next five years,” said Gupta.
Over the past three-odd years, he said, the bank had invested about $500 million globally for a digital transformation. Investments made specifically into India weren't disclosed. India is the first country where they've launched the mobile-only bank and the lender will be taking it to other markets, too.
This comes as the bank awaits clearance from the Reserve Bank of India to convert into a wholly-owned subsidiary (WOS) in the country. The application was in April last year.
“We want to become a subsidiary in India so that we can grow and focus on the small and medium enterprise (SME) business, a very small portion (for it) in India till now. Globally, 17-18 per cent is SME banking, 20 per cent is corporate and the rest is retail,” said Surojit Shome, chief executive, DBS India.
Once the bank gets approval for WoS, they are looking at scaling up the branch network to 60-70 in the next four years. At present, the bank has 12 branches. Gupta said the Indian operations account for about five per cent of the total book. So far, the lender has invested Rs 6,500 crore into India. It infused Rs 1,700 crore of tier-2 capital in the past two years and Rs 670 crore of tier-1 capital in FY16.
The need for tier-i capital infusion, said Shome, was was at an elevated level to compensate for the erosion due to a rise in bad loans in the past couple of years.
“We had some portfolio challenges, which have been cleared, and are looking at returning to marginal profitability in FY16,” said Gupta. In FY15, the bank's loss was Rs 275 crore, on the back of higher provisioning.