Issue of opening up liabilities needs relook: Fino Payments Bank MD & CEO

Rishi Gupta, MD & CEO, Fino Payments Banks stresses for a change in regulation to allow payments banks to lend in an interaction with Manojit Saha

Fino Payments Bank completed five years of operation in June, making India’s only listed payments lender eligible to apply for conversion into a small finance bank (SFB). RISHI GUPTA, the bank’s managing director & chief executive officer, tells Manojit Saha that the board will consider such a move at an appropriate time. Edited excerpts: 

Fino Payments Bank is now eligible for applying for a SFB licence. Is that something the board is looking at?

The first five years of journey was quite rewarding. Fino is one of the first banks to become profitable in the payments space and also the first listed payments bank. There is a lot of headroom available in the payments bank space in terms of growth. So there is no real hurry for us to look at lending or getting into SFB from a business model point of view. SFBs offer to get unrestricted liabilities. That is a benefit and it offers a lending platform. Having said that, we see a lot of play in the current model itself. Right now, there is no discussion at the board level on applying or converting for a small finance bank. This is a piece that we will be evaluating on a regular basis. Whenever we feel there is an appropriate time, we may re-look at it more seriously at that point in time.

Payment banks are not allowed to lend. Do you think the RBI needs to revisit the issue and allow such banks to extend small loans, at least?

I agree with you. There has been multiple representation that has been made to the RBI by us, by industry forums. Payments banks are allowed to do all kinds of payment transactions. We are also allowed to keep customer deposits up to Rs 2 lakh in payments banks, and in our partner banks we can keep more. So we have payments infrastructure and some parts of liabilities infrastructure. There have been multiple representations (to the regulator) that while 100 per cent of the deposits goes into government securities and fixed deposits, the Rs 2-lakh limit should go up. To my mind, why should there be a limit? It is a completely secured business, there is no credit risk or no other such as such. Secondly, the Deposit Insurance and Credit Guarantee Corporation cover is also there up to Rs 5 lakh. On the lending side as well, our customers are from rural geographies, they come to us to open an account and at some point they expect us to lend. Now that it is seven years of the regulation, if the regulator can re-look at the issue, open up liabilities and micro credit for payments banks, the regulations will be far better.

Fino Payments Bank has embarked on its 2.0 version from FY23. What is the plan and what do you want to achieve?

Our focus so far has been to establish ourselves on the ground physically. The customer segment which we are focusing on is the middle to lower pyramid of the country. They need physical access, transactions, and basic banking services. In the first phase, we have covered over 90 per cent of districts, and we have nearly a million merchants on which the transactions can be done. Fino has always talked about the ‘phygital’ model — where physical and digital can seamlessly meet. We believe our customer segment requires assisted digital, before they move to a completely digital model. Therefore, for us, setting up the physical infrastructure was important. We have done quite well on that.

From physical to assisted physical or phygital, then to digital is what Fino is doing. Fino 2.0 talks about how we can make our customers more digitally savvy.

The fourth quarter of the previous fiscal year (Q4FY22) was characterised by strong revenue growth? What were the main drivers?

Revenue growth was coming from 2-3 parameters. Fino has been focusing on how we can build up our own customer base. Casa (current and savings account deposits) and CMS (cash management services) have been our flagship products. Our casa growth has been quite substantial in Q4. We have opened 670,000 customer accounts in Q4, compared to 510,000 in Q3 — 30 per cent-plus growth. Secondly,  CMS business grew 30 per cent over Q3.  Over and above that, the remittances business, which was impacted due to Covid, has started to come back.

What is the revenue projection for FY23? In FY22, it was Rs 1,009 crore.

Our guidance is that we will look for more than 25 per cent year-on-year. In FY22, our revenues grew by 28 per cent.

Remittances is one of the key sources of your revenues, which contributed 35 per cent of the total? Its share to total has fallen from 51 per cent (FY20). What is the reason? Do you see revenue from this segment to decline further?

Our overall business is growing. In that business, the share of remittances was slower as compared to some other businesses. Casa and CMS in FY20 was only 7 per cent, now it is 18 per cent.

Increasing competition could result in higher merchant payouts, which in turn could dent margins. How do you plan to address the issue?

There is definitely going to be more competition in this ecosystem. We are seeing local players getting into some of these businesses. Merchant payout is one of the factors, which may get affected. But the bank enjoys stickiness because of its relationship with merchants. The bank is just five years old, but the Fino group is 15-year-old. Merchants understand that it is better to work with a stable, growing organisation. With the IPO, the brand of Fino has become more visible, and merchants also want to be associated with us because of the brand.