Move comes after Crids, in which Bansal owns a majority stake, applies for banking licence
Bansal had acquired Essel MF and DHFL General Insurance for about $40 million
Sachin Bansal has resigned from the board of Ujjivan Small Finance Bank, it informed the exchanges on Tuesday. Bansal’s decision to step down as an independent director of Ujjain on Monday comes weeks after Chaitanya Rural Intermediation Development Services (Crids), wherein the Flipkart co-founder holds a majority stake, applied to the Reserve Bank of India (RBI) for a universal banking licence.
Navi Technologies, fully owned by Bansal, has a 94% stake in Crids. He has earmarked almost the entire $750 million he had earned from Flipkart’s sale to Walmart to pursue his banking ambitions, said three people familiar with his moves, requesting anonymity.
Deloitte Touche Tohmatsu India Llp has been roped in as an adviser to help Bansal chalk out Crids’s banking road map.
As part of his foray into the financial services space, he had acquired Essel Mutual Fund and DHFL General Insurance for about $40 million. Subsequently, he had invested nearly $100 million of venture debt in startups and bought debt papers of Piramal Enterprises, Altico Capital and Indostar Capital Finance.
On 10 January, Bansal had said that he had applied for a universal banking licence through Chaitanya India Financial Credit Pvt. Ltd (CIFCPL), and not in his personal capacity, as he does not have experience in banking, TheTimes of India reported on Tuesday. Bengaluru-based CIFCPL is a 100% subsidiary of Crids and operates in the secured and unsecured credit space.
“Bansal sees financial services as India’s next big opportunity, the way he saw e-commerce in 2007," said the first person mentioned above. “What’s different about his approach from every other fintech entrepreneur and investor is that he still sees traditional banking having the potential to scale and go to the hinterland, and he is not taking too much risk. It is risk averse aggression from his side, though that may be a misnomer."
Universal banks are legally mandated to direct 40% of their lending to the priority sector and have a minimum paid-up voting capital of ₹500 crore. It is mandatory to have physical branches, but the recent branch authorization policy allows new players to set up banking outlets manned by either the bank’s staff or business correspondents. Meeting these requirements should not be a cause for concern for the Flipkart co-founder, as CIFCPL is present in five states.
Bansal plans to expand the portfolio of the group company from ₹740 crore as on 30 September 2019 to ₹3,600 crore by March 2023, according to rating agency Icra. He also intends to diversify the loan portfolio into new asset classes such as consumer and personal loans, two-wheeler loans, and business loans (fintech-based) under Crids, while CIFCPL continues to focus on its microfinance business. CFCPL is expected to grow its managed portfolio to ₹2,600 crore by March 2023, while Crids is expected to grow its book to ₹1,000 crore in the period under consideration. Bansal has roped in former RBI director and ICICI Bank executive director Nachiket Mor as independent director.
Former HDFC Bank deputy managing director Paresh Sukthankar also came on board as an adviser.
Bansal’s entry into financial services is being viewed as a disruption by many experts.
“He is likely to come up with innovations in the technology space and also drive the best of tech talents," said a banking consultant, also requesting anonymity. “India is going to see a lot of action in the fintech space. Investments in the space are expected to cross $3 billion by March 2020 from $2.8 billion currently," he added.