Bajaj Finserv eyes banking biz, to start advisory biz by end-2010

Bajaj Finserv eyes banking biz, to start advisory biz by end-2010

Mumbai: The Bajaj Group is gearing up to enter the banking business and considering applying for a licence through its financial services arm-Bajaj Finserv, a top company official said.

Bajaj Finserv’s keenness to enter banking stems from the fact that the Union finance ministry is understood to be considering allowing high-performance NBFCs to convert themselves into banks.

“We are keen to enter the banking business and will consider applying for a licence once the Reserve Bank comes out with regulations allowing non-banking finance companies (NBFCs) to convert themselves into banks," Bajaj Finserv’s managing director Sanjiv Bajaj told PTI here on Sunday.

Presently, all Bajaj group financial services businesses are conducted under the Bajaj Finserv umbrella with Bajaj Auto Finance being its NBFC.

“The banking entity will either be a subsidiary of Bajaj Finserv or an independent company-we will take a call on this once the guidelines are released," Bajaj said.

Funding for the banking business would not be a problem as “we are sitting on Rs900 crore of cash and investments and zero-debt," he said, adding “having a bank will transform Bajaj Finserv into a financial one-stop shop for customers."

Bajaj Finserv, through its subsidiaries-Bajaj Allianz in the life and general insurance businesses and Bajaj Auto Finance (its NBFC)-has a huge pan-India retail presence with a strong footprint in Tier II and III towns.

“We can leverage these strengths to our bank’s advantage. Besides, we have plans to enter the mutual funds and financial advisory businesses. A bank will perfectly complement all this," Bajaj said.

The proposed bank will have a strong retail focus and would aim to garner a significant number of low-cost deposits. We are looking at a strong footprint in Tier II and III destinations," he said.

On its advisory business, Bajaj said that he hoped to start the business by the third-quarter of this calendar year. A company, Bajaj Financial Solutions, has already been set-up and it is a subsidiary of Bajaj Finserv.

Here again, there would be a strong retail focus and the customer-target would be the upper middle-class and above, he said.

For mutual funds, Bajaj Finserv has tied-up with Allianz (just like it has for its two insurance businesses) and has applied for regulatory approval. “As and when we receive the nod, we will start to build a business model," Bajaj said.

In Q3 FY10, Bajaj Auto Finance’s gross income grew from Rs158 crore to Rs250 crore and PAT from Rs11 crore to Rs27 crore. “It has assets under management of Rs3,600 crore which is similar to many small banks," Bajaj said.

NPAs which were always under control over the life of the company except between 2005-07, are once again showing a declining trend and are now just a little over 4%, he said, adding “they will fall still further by end of this fiscal."

Bajaj’s life and general insurance businesses too have a deep penetration in Tier II and III destinations. While premiums in its life insurance business in Q3 FY10 rose from Rs2,400 crore to Rs2,750 crore, profit vaulted from Rs30 crore to Rs150 crore, he said.

In general insurance, its topline stood at Rs583 crore while its bottomline expanded from Rs17 crore to Rs29 crore.

With a strong presence already in the financial services segment, the Bajaj group is confident of leveraging its capabilities effectively in banking as well, Bajaj said.