‘One-minute banking’ will be Suryoday Microfinance’s unique selling proposition once it converts itself into a small finance bank (SFB) in August, according to CEO and Co-Founder R Baskar Babu. The ‘banking in a jiffy’ push stems from the realisation that customers at the bottom of the pyramid cannot afford to spend much time for banking transactions without their daily earnings getting impacted. What Suryoday envisages is that between chores, customers such as vegetable vendors, cabbies, auto drivers and domestic helps could just step into either a branch or a business correspondent outlet and complete their banking transaction in a minute. Suryoday MF received “in-principle” approval from the Reserve Bank of India in September to start an SFB. In an interview with BusinessLine , Babu outlines his thoughts on how his six-year-old institution will transform itself into a bank. Excerpts:

What inspired you to start a micro-finance institution?

Generally, (financial services) products are not bought for you, they are only sold. Mutual funds and insurance are sold. Actually, financial intermediaries have to prescribe products with the customer in mind, and then profitability will follow.

We wanted to fill in the void of providing transparent and best service for our customers. That is how we wanted to get into micro-finance.

Unlike many of our predecessors or post that, I didn’t really start from a platform of poverty alleviation because the entire economy was doing well, people’s aspirations were going up and probably many whom you consider to be the so-called poor, do not even want to feel that they are poor. Nobody wants to be told that. They want a facility where they will be equal to others.

We consciously took a decision we will not even refer to our customers as poor customers. Right from the beginning, we never addressed our customer, saying that you are poor and we are giving this service.

We said we are doing win-win transactions together. So, our pitch to all our customers was ‘what we are has no material impact in terms of where you want to be.’

…We are doing our business and any business which is conducted very transparently — the pricing and processes — and with the customer in mind will eventually be profitable. The intent is to be with the economically-challenged customers, who are aspirational, and provide services in a transparent manner. Then they grow and we grow. So, MFIs can grow along with their customers and graduate themselves (to SFBs).

What business model are you envisaging for your proposed bank?

All our customers still find time to recharge their mobiles for ₹10 or ₹50 because they go to the shop and give their number and the recharge happens in less than a minute. 

Banking transaction too should get completed for our customers in less than a minute. So, we will have to necessarily provide door-step banking.

We are trying to have (business correspondent or BC) outlets which are operational for at least 12 hours — 8 am to 8 pm. Customers can walk into these outlets and do their transactions (a deposit or a withdrawal) in less than a minute.

Mostly, the BC outlets will be exclusive. And our responsibility will be that it is profitable for them to give their infrastructure and time. So, we are trying to identify good quality BCs, alongside our branches, which will provide door-step banking. Technically, a customer will not have to walk more than 200 metres to access an outlet. BCs will be predominantly catering to deposit products and remittances.

Maybe, we will start our banking operations with a smaller set of branches, probably even 25 and then within a year’s time have closer to 100 branches. 

We are currently planning to have 1,500 BC outlets. For every branch, there will be 15 outlets — that is what we have in mind. They will be no more than 5 km from the branch. The critical success factor is in terms of how strong the BC network can be and the service quality at the BC outlet should be as good as what you get in the bank branch. It should be comfortable and it should be quick. And the customers should like it.

Getting it right is our focus now. This is probably what many of us would want to do in the SFB space.

What will be your loan offerings? 

We will be looking at individual loans for existing customers to start with.

Predominantly, there will still be productivity-linked loans but we will also expand to cater to loans for educational purposes (not large ticket), personal loans and for house repair.

Housing loans will come in as a product but not in the first two years. Our dream would be where a customer can call a call centre and say I have a requirement for a loan of ₹5,000 for this purpose and in five minutes, the account is credited. The customer need not even walk into a branch and fill in a form.

So, there is a pre-set limit. He/she calls in and gets a loan. 

Our relationship has to move at three levels — from a uni-product it has to become multi-product; from an individual customer relationship it has to become a relationship with a household; and then all of this has to really start with full-fledged financial literacy.

Will customers be comfortable placing their hard-earned money as deposits with new banks?

Generally, a relationship for our kind of customers starts with creating trust, which is by doing a lending transaction. I have already lent. The customer knows that he has already borrowed ₹20,000 from me and the outstanding is around ₹17,000 and over a period of time, there is a trust factor that my money (savings), which is much smaller than the amount borrowed, is safe.

There is a mental comfort that the amount that I have deposited is still smaller or equal to the amount I owe to the bank.

Everything being equal, the trust becomes important. Equally important is the painless way of doing the end-transaction.

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