BackSmall finance banks’ success will depend on execution in reaching customers: Equitas
Firm says how it reaches customers in rural areas using technology and providing savings products that are simple will be important
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Chennai: Equitas Holding Ltd, which is among the 10 firms that received the Reserve Bank of India’s in-principle approval for a small finance bank on Wednesday, says execution over the next 18 months will hold the key to success.
Small finance banks are a move towards expanding access to financial services to low-income earners in rural areas. The 10 entities that received central bank approval include Ujjivan Financial Services and Janalakshmi Financial Services, among others. The in-principle approval is valid for 18 months.
How Equitas reaches customers in rural areas using technology and providing savings products that are simple will be important, P.N Vasudevan, managing director of Equitas Holding, told reporters.
On a consolidated basis, the company posted a net profit of ₹ 756 crore in the year ended 31 March 2015 and had ₹ 4,010 crore in outstanding loans. Microfinance accounts for nearly 53% of its lending, followed by used truck finance, lending to small enterprises and home finance. It expects to add lending to agriculture as well.
The biggest challenge low-income earners face is their inability to save; so, the objective of Equitas will be to provide access to planned savings and insurance products with convenience and ease, said Vasudevan. The objective will be to reduce their dependence on borrowing.
With 18 months ahead, the eight-year-old company has a lot of work to do before it gets the final approval from the regulator. It will have to implement an entire new technology platform, and merge three of its entities—Equitas Micro Finance Pvt Ltd, Equitas Finance Pvt Ltd and Equitas Housing Finance Pvt Ltd—with the holding company.
The Chennai-based company will have to reduce its foreign shareholding from the current 93%. The company expects its foreign investors to dilute their stake to domestic investors. According to the current policy, the aggregate foreign investment in a private sector bank from all sources is capped at 74% of its paid-up capital.
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