May pitch for bank licence
Muthoot Group will definitely evaluate an entry into the banking sector, but will not convert Muthoot Finance Ltd, the flagship company of the group, into a bank.
M. G. George Muthoot, Chairman, made it clear that Muthoot Finance will never be converted into a bank even if the guidelines permit.
“If they (RBI) give a separate licence for the bank based on the work we have done in all these years, then we will go for it. We will only go for a separate bank,” he said.
“Banking licence is an interesting prospect. We will definitely evaluate it. But there has to be a strategic fit with existing lines of business,” said Alexander George Muthoot, Director, Muthoot Group.
Muthoot Finance is looking to grow its assets under management by 10 per cent this fiscal, M. G. George Muthoot said.
Plans are afoot to open 300-400 branches this fiscal, taking the overall network to about 4,500 branches, he said in an interaction with Business Line here. The total branch network was only 37 in 1993.
Lending against households’ gold, which has become a niche business, Muthoot Finance’s growth has been stupendous over the last two decades.
About 70 per cent of the company’s branches are in semi-urban and rural areas. The average size of each loan is Rs 35,000, and nearly 60 per cent of the loans is less than Rs 1 lakh.
The new branches will mostly come in these regions and is going to help improve financial inclusion, the chairman said.
As a non-deposit taking NBFC, Muthoot Finance sees itself playing a crucial role in meeting the financial needs of the people in many un-banked areas of the country.
“We have presence in many locations where you can’t find a bank. It’s very easy to say NBFCs should not be there. But they were created for a purpose. The idea is to supplement banks in their efforts,” he said.
Muthoot Finance’s existing network of 4,240 branches is next only to State Bank of India and Punjab National Bank.
But this kind of growth has also brought the company under the glare of the regulators, who have hinted at some fiats.
“Last year, we were only consolidating given the regulatory uncertainties. But this year we will go for growth and also some consolidation,” the chairman said.
After taking the consolidation path in 2012-13 (assets under management grew 6 per cent), the chairman is now advising his nearly 30,000 strong staff to go for growth.
Alexander George said one would not get to see this fiscal the kind of branch expansion seen in 2010 and 2011. The company added 2,000 branches in these two years, a record of sorts.
“The Government should encourage players like us and give us access to low-cost funds so that we can scale up. We have set up the distribution network. Assist us in taking it forward,” he added.