Page 5 - Small Finance Banks

Small finance banks look to tap Odisha market for growth

Small finance banks (SFBs) have lined up firm plans for Odisha, a state with huge chunk of areas untouched by banking services.These new generation banks are betting big on Odisha as the state is having more than 4200 panchayats where people are deprived of banking services.Suryodaya Small Finance Bank, headquartered in Navi Mumbai, is the first among the small finance banks to start its services in the state by opening a branch here.In Odisha, the new generation bank has approval for opening of another 16 new banking outlets in the next one year. In addition, it will be converting all its 37 micro-finance branches across Odisha into full-fledged banking branches in the next one year.SFBs are offering niche banking services in India. Entities with a small finance bank license can provide basic banking service of accepting deposits and lending.Jana Small Finance Bank is also planning to start its services in Odisha. Its operations in Odisha are likely to start somewhere between ...

Small finance banks to lower deposit rates as pressure on margin mounts

Small Finance Banks, which so long have been defying the trend of falling interest rates and offering as high as 9 per cent interest rates on deposits, are now falling industry lines and reducing interest rates.ESAF, Suryoday, Capital Local Area Bank and Fincare Small Finance Bank are few of the banks looking to reduce interest rates on deposits by at least 25-50 basis points in the next one month. Many small finance banks are increasingly facing stress on margins due to non-payment of dues due to the impact of demonetization last year. However, despite the reduction, the interest rates offered by the SFBs would be about 50-100 basis points higher than that offered by the banks. "We reduced interest rates on deposits by 25-50 basis points recently in different maturities. We will be reducing rates by another 25-50 basis points by December," said R Baskar Babu, MD and CEO, Suryoday Small Finance Bank, which at present is offering interest rate of 8.75 per cent for a period greater ...

Small finance banks raising deposits to replace high-cost loans

In addition, the new-age banks are betting big on technology to reduce the cost of operations

Small finance banks on deposit mobilisation spree on 1st year of operation

With eight out of ten small finance banks now fully operational, aggressive deposit mobilization in the first year of operation has turned out to be the key strategy for almost all the new entities. In addition, the new age banks are betting big on technology to reduce the cost of operations. All the operational small finance banks are offering up to 100-150 basis points higher interest rate on term deposits over market rates. This apart, some of the banks are also eyeing bulk or corporate deposits. The idea behind the move is to replace high cost loans taken by small finance banks as microfinance institutions with relatively low cost deposits. "Our highest interest rate on fixed deposits is around 8 per cent, and is in general one percent higher than the prevailing market rate. We are looking for both bulk and retail deposits, and aiming to replace high cost loans with low cost deposits. We are also raising deposits through CDs (certificates of deposits)," said Samit Ghosh, MD and ...

Faced with high group lending defaults, SFBs move towards individuals

With a majority of small finance banks already operational, a challenging start has already forced a number of them to tweak lending strategies. Due to demonetization, coupled with rumors of debt waiver, the delinquency rates for microlending has shot up as high as 10 per cent, against about one to two per cent prior to demonetization. Hence to bypass the risk associated by group lending, several small finance banks are looking to quickly migrate to secured individual lending, mostly to non-agriculture sectors. "We are planning to diversify our portfolio to minimize the risk associated with group lending. As a bank, that would anyway would have been a focus area. However now, due to demonetization, there is an additional focus to move quicker than anticipated to individual lending," said Rajeev Yadav, MD and CEO, Fincare. From about 90 per cent unsecured group lending portfolio, Fincare is looking to reduce it to around 50 per cent in the next three to four years. Kerala-based ESAF ...

SFBs bet on local hiring in face of cost-effective staff crunch

With all the ten small finance banks (SFB) set to be operational over the next two months, local hiring has turned out to be the essence of their human resource policy. With each of the proposed bank requiring a minimum headcount of close to 500 new recruits for expansion next year, rough estimates suggest that at least 5000 new jobs are expected to be created collectively from ten small finance banks.Notably, the SFBs are facing acute shortage of talent as they are finding to recruit seasoned banking professionals befitting their low cost structure. So long, as MFIs, the average salary of their staffs ranged between Rs 1-2.5 lakh across junior and senior-mid levels. In contrast, in a private sector bank, as a fresher an average graduate (non-management background) earns anywhere between Rs 3-5 lakh. Salary is much dependent upon educational qualifications, and institutes from which it is earned. Also, in an MFI, with a qualification till the higher-secondary level, one can elevate ...

Small finance banks compete for term deposits amid falling interest rates

This comes at a time when banks are flush with funds after note ban and are cutting deposit rates

Small finance banks require up to Rs 60k crore of non-equity funds by FY20: IndRa

The current funding mix for MFIs includes bank debt, other borrowings and equity, with bank debt being the largest proportion in the mix

Proposed branch definition poses challenge for SFBs

The proposal to widen the definition was recently mooted by RBI

Overseas investors max out investments in Equitas, Ujjivan

The IPO of small finance bank licensees had created legroom for FPI investments

Small finance banks see spurt in valuations

Valuations of the proposed SFB have gone up by almost 50-60% in the past year

Small finance banks to woo depositors with better rates

Small savers are likely to gain from competitive rates expected to be offered by these banks

Proposed small finance banks opt for holding firm

According to RBI norms, the promoter's minimum initial contribution to the paid-up share capital of an SFB should be at least 40 per cent

Small finance banks expect relaxation in branch norms

Proposed banks want to work in hub-and-spoke model, with permission to convert some of offices into customer service centres

India's first small bank to start operations on April 13

Jalandhar-based Capital Local Area Bank currently active as local area bank