BackMagma Fincorp to apply for banking license
Progression towards becoming a bank a natural extension with which it shall be able to expand its inclusive financial services, says firm
Premium(Priyanka Parashar/Mint)
Mumbai: Non-banking finance company Magma Fincorp Ltd said on Wednesday that it has decided to apply for banking license. Its board has already approved the decision to go ahead with the application process.
Magma, which claims to have an active base of around 400,000 customers and a total loan assets of ₹ 16,240 crore under management as on 31 March 31 2013, currently caters to financing of vehicles, construction equipment, tractors, housing finance, industry loans and general insurance. The company has 278 branches in 20 states and one union territory and employs about 7,500 people at present, mainly serving in rural and semi-rural areas.
The 25-year-old finance company had launched a general Insurance company in 2012 and launched its housing finance business with takeover of mortgage business of GE earlier this year. The group feels that its progression towards becoming a bank is a natural extension with which it shall be able to expand its existing successful model for inclusive financial services multiple times across India.
Magma said in a release that while it applies for a banking license, its focus remains firmly on the existing business, and upon receipt of licence, all the customers of Magma will have access to a full range of banking services very quickly including deposits, remittances etc., so a lot of inclusion will occur by way of additional services to the existing customer base even without Magma expanding its asset base.
The Reserve Bank of India has proposed an 18 month window from the date of in-principle approval to commence banking operations. Magma feels that the proposed time window would provide sufficient opportunity to the company to make a transition to a bank with minimum disruption in the normal business of the company.
Magma management said in the Wednesday statement that it has a proven track record on credit prudence and risk management despite operating largely in remote areas where a large number of customers lack basic documents to establish their intrinsic credit worthiness. “Hence, growth will be achieved without compromising prudence and effective risk management," it said.
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