Suryoday Micro Finance to convert into small finance bank by August next

Mumbai-based Suryoday Micro Finance will transform itself into a small finance bank by August 2016, according to a top official.

The microfinance company, which has institutional investors, such as International Finance Corporation and HDFC Group as shareholders, received “in-principle” approval from the Reserve Bank of India in September to start a small finance bank (SFB).

Though it has 18 months to transition into an SFB, according to the RBI guidelines for licensing of SFBs, Suryoday wants to cut down this time to 10 months.

R Baskar Babu, Co-founder & CEO, said: “We are one of the few in the SFB space who are directly converting from an MFI into an SFB. So, there is no transfer of assets or liabilities.”

Of the 72 applicants, 10 received in-principle approval from the RBI to set up SFBs. Of the 10 selected entities, eight are MFIs.

Suryoday, which started operations in 2009, currently has 173 branches spread across seven States — Maharashtra, Tamil Nadu, Gujarat, Odisha, Madhya Pradesh, Karnataka, and Rajasthan.

Elaborating on Suryoday’s plans, Babu said the immediate exercise is to reach out to the 6.30 lakh customers during the period of transition.

“We would like to see a rollout in 10 months’ time. We want to launch by August 25, 2016. So, we fixed a date and will work backwards.

“There are many things which we will have to do now. One of the key things would be in terms of understanding our existing 6.30 lakh customers more in-depth than just capturing their income and expenditure and qualifying them as an MFI customer,” explained Babu.

As at October-end, the MFI had a gross loan portfolio of ₹756 crore. Cumulatively, it has disbursed ₹2,047 crore since inception.

Babu said Suryoday SFB may begin its banking operations with a smaller set of branches, probably 25. Then, probably, within a year’s time from the date of beginning operations it will have closer to 100 branches.

“So, in the first full year of operations, we will have closer to 100 full-fledged branches. As for the remaining 73 branches, some of them will get merged and the others will also be converted into bank branches over a period of time,” he added.

According to the RBI, the objective of setting up SFBs is to further financial inclusion by providing savings vehicles, and supplying credit to small business units, small and marginal farmers, micro and small industries, and other unorganised sector entities.

These banks will be required to extend 75 per cent of their total credit to sectors, including agriculture, housing, and education , which are classified as priority sector by the RBI. At least 50 per cent of their loan portfolio should constitute advances of up to ₹25 lakh.

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