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Small finance banks can offer huge value to the economically weaker sections of society by providing them access to quality financial services — it is not just about extending credit but also enabling safe savings, says PN Vasudevan, Managing Director, Equitas Holdings.
The Chennai-based microfinance institution, which has got in-principle approval from the RBI to operate a small finance bank, believes this concept can help improve the financial literacy of the poor. With awareness of the benefits of savings and insurance, their dependence on borrowings can come down, says Vasudevan.
That is why this is not only a milestone for companies that bagged small finance bank licences but also, from the clients’ perspective, a significant driver of change for the better.
Equitas Holdings has been in the microfinance business since 2007, providing loans to first-time buyers of used commercial vehicles, micro-enterprise loan of ₹50,000 to ₹10 lakh, micro-housing loans of ₹50,000 to ₹5 lakh, and affordable housing loans of ₹5 lakh to 25 lakh. The company’s loan book stands at about ₹4,000 crore and its net worth is more than ₹1,000 crore.
Bagging the small finance bank licence is an important milestone for the company, which can now get into the full range of banking services, including credit and liability products, such as savings. Over the years, Equitas has built up links with its clients. And extending additional services now will only be a natural extension involving very little incremental cost.
While declining to go into specifics as the finer details need to be worked out over the next year or so, Vasudevan says this is an opportunity for MFIs and their clients.
As of now, the market segment that microfinance institutions cater to does not have the benefit of quality savings opportunity and are dependent on the unorganised sector. But as small finance banks begin reaching out to these sections, opportunities to make financial inclusion a reality, would arise, says Vasudevan.
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