Suryoday Small Finance Bank likely to grow 50-60% the next couple of years, says MD Baskar Babu

Suryoday Small Finance Bank formally launched its operations on January 23 by opening a branch near its headquarters at Belapur (Navi Mumbai). The bank, which was a microfinance institution (MFI) in its earlier avatar, will first inculcate ‘banking habits’ in its 7.50-lakh odd MFI (loan) customers before tapping them for deposits, says MD and CEO R Baskar Babu. In an interview to BusinessLine , Babu, who is an engineering and management graduate with over two decades experience in the financial services space, elaborated on how he intends to steer the new bank. Excerpts:

What are your branch roll-out plans?

In February, we will roll-out five to six branches and then slowly keep scaling up the network every month. Adding two to three branches every month is the plan at this point of time. This will later be accelerated to four to five branches a month. And what we are also doing is that we will be converting slowly our existing micro-finance branches into bank branches. So, the conversion will happen on a parallel basis. We will do that (conversion) over the next 12-18 months. We have around 220 micro-finance branches.

In the first two months, we want to ensure that everything is working the way we want it to and then the scale up can happen much faster. It is likely that we will have closer to 90 new branches and about 220 converted branches by June 2018.

We will be having our branches in Maharashtra, Odisha, Tamil Nadu, and Madhya Pradesh, and then in other States such as Gujarat and Karnataka.

And once we get the hang of what it takes to expand without necessarily putting branches, we will also plan to enter Chhattisgarh and Jharkhand.

How about ATMs and business correspondents?

We are planning to have an onsite ATM with every branch, including the branches which are being converted. These will be full-fledged ATMs which will also double up as cash-deposit machines. By the end of March-2018, we will have at least 100 ATMs.

Earlier, a huge ATM network was perceived as a key strength but with the digitisation focus we are re-evaluating in terms of whether the focus has to be in terms of putting more ATMs or enabling our customers to go more digital.

I think we will choose the latter. Probably prior to demonetisation, this (ATM) was taken as the minimum required for banking operations. Now what we are looking at is in terms of what is it that we can do, in getting even our existing customers to go digital.

We will also have a huge network of business correspondents (BCs), which is our focus. It is likely that within three months we will have at least 20-30 good quality BCs, who will offer doorstep banking services. With every branch we are planning to have at least three to five BCs. So, we will have 1,500-2,000 BCs by March-2018.

Currently, we have around 7.5 lakh (loan) customers. We are not focussing on them for deposits. What we want to do first is to inculcate banking habits. We are not really targeting CASA (current account, savings account) immediately. We want to make sure that they get into the banking habit.

So what we will do is, through our bank branches and BCs, we will enable them open an account, help them operate it meaningfully rather than just looking at them only for CASA. Once that happens, I think, CASA becomes a derivative. Once the savings and banking habit is inculcated and when they start transacting they end up having a float (in the account) and it also increases stickiness.

So, our focus is in terms of opening an account for them and making sure that they are comfortable transacting through it. Our focus is equally on mobile banking as well on internet banking. Our focus is in terms of teaching them how to start using mobile banking if not Net banking. And when they start using it, we will try and see if most of their inflows also could be through the electronic (digital) form. When they start transacting, I think savings account balance becomes a derivative.

What I think we should do is help them or enable them do their first transaction and tell them that it is no rocket science and is reasonably safe. With all the security in place, we are going to even help them do mock transactions (without touching their account).

Once they know what it takes to do the transactions, they are at ease and can do it themselves.

What is your business growth plan?

As an MFI, I was a little constrained in giving a loan as and when the customer wanted. So, today, as a banking institution I can give a loan as and when they want, and I can take in their savings as and when they want.

If we are able to balance this in a convenient manner, the growth can be much more than what we can envisage in our business plan. So, we are taking one thing at a time, making sure that our 7.5 lakh customers can be sticky.

Even without acquiring more and more new customers, we will be able to probably grow at 50-60 per cent every year for the next couple of years. We have to get our basics right.

Because of demonetisation and slowdown effect, we are likely to end the year (FY 17) with assets of ₹1,100 crore. Otherwise we would have ended this year with assets of ₹1,250 crore. We are introducing shopkeeper loans, whereby we will go and pick up the instalment/collections on a daily basis. The customer can pay us during the month at any point of time on any day.

Low-cost housing becomes another key focus (we are building a platform for it). We are looking at small working capital loans for the MSME segment too.

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