Microfinance player Ujjivan Financial Services has made a strong debut on the bourses.

Speaking to Bloomberg TV India , Ujjivan Managing Director and CEO Samit Ghosh elaborates the company’s move towards a payment bank. The microfinance firm is planning to tap into the micro and SME space where it sees tremendous growth potential, he said.

Ujjivan had earlier applied for a banking licence. What is the status on that? Can you elaborate on your plan to transform from a microfinance firm to a full-fledged bank?

We had applied (for banking licence) earlier. We got a provisional licence. After our capital restructuring is done and legal structure is put in place, there is going to be a holding company, a subsidiary and then there are governance issues in terms of our Board. So, IPO is the first leg in meeting the domestic capital requirement. After this, we have to apply to the RBI for the final approval. But in the meantime, we actually have to go on building our new bank. Our bank will start in the first quarter of 2017.

As per the RBI rules, 25 per cent of your branches should be in the unbanked areas. So what is the plan going ahead and how will it impact your returns?

We have actually explored all those areas. Traditionally, banks have always looked at these (rural areas) as a cost of doing business rather than a business opportunity. So what we find in these areas, across all segments — whether they are rich, poor or the middle class — they have no access to banking services and they are desperate for banking services. So we see this as an opportunity and we are going to set up units there. But it is going to be economic and small branches because basically you are looking at branches where population is not more than 10,000 and where you are serving 4-5 villages. We see this as an opportunity for us. I think there is an enormous demand for banking services in those areas.

What is your strategy for the next two years and which sectors do you see yourself performing?

Our strategy is really to go into micro, small and medium enterprises and grow that business to a significant level because right now 88 per cent of our business is goods lending. But we find there is a huge space in terms of small businesses, micro entrepreneurs who require funding. The government is also encouraging the MUDRA scheme and that is where we find a big opportunity for growth.

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