Our becoming bank rests on regulatory intent for NBFCs: Piramal Finance MD

In a Q&A, Jairam Sridharan dwells on his company's proposed retail thrust and the challenges facing the NBFC sector

Piramal Finance, the lending arm of the Piramal Group, has drawn a road map to increase its business to Rs 1 trillion in the next three to four years. Jairam Sridharan, managing director, Piramal Capital & Housing Finance, shares the group’s plans in an interview with Manojit Saha. Edited excerpts:

The retail lending book of PEL was about Rs 25,000 crore. I assume that is the size of the loan book of Piramal Finance, which you want to grow to Rs 70,000 crore in the next 3-4 years. Will you focus only on housing, or there would be some other segment of consumer loans?

We are thinking of a multi-product retail lending business — a diversified retail lending franchise. We are, of course, going to be heavy on affordable housing, and MSME lending. Rest of the business will be around used car finance, personal loans to salaried customers… we also have a microfinance business that we launched a few quarters ago, and a digital lending business. So, there are multiple products here, both secured and unsecured. Our intention is to grow about Rs 70,000 crore over the next three years, when you should expect to see the overall Piramal business at roughly Rs 1 trillion with about two-thirds coming from retail and the rest from wholesale lending.

What are the kind of markets and average ticket size you want to maintain for Piramal Finance?

We want to be at places where traditional big banks have less presence. Our intent is to address the lending needs for the budget customer. Those lending needs are of smaller tickets as compared to a large metro. In housing, you should expect a ticket size of Rs 14-17 lakh. In MSME lending, if it is unsecured, we are looking at Rs 5-6 lakh, and Rs 17-19 lakh in case of secured. If it is a personal loan, we are looking at Rs 4 lakh, while for car leans, too, it is about Rs 4-5 lakh.

What is the medium-to-long term road map for Piramal Finance?

That depends on what the regulatory intent is on NBFCs, particularly large ones. We have seen regulations for large NBFCs becoming tighter and tighter. Over time, the regulator has also expressed interest to create more paths for on-tap bank licences, and a path to create more banks in the country. Our hope is as we go through the next couple of years, we will see more clarity in terms of regulatory stance on the issue and we would be guided by that and take action on that regard. In India, NBFCs have existed for many decades, and have continued to stay profitable with a fairly stable and sustainable business model. It is more stable and sustainable to have a banking business model. We are happy to do either, depending on what the regulatory comfort is.

NBFCs faced several crises in the last few years. IL&FS crisis is one of them, when banks choked funding to NBFCs. NBFCs perennially depend on banks for funding…

There is some merit to what you are saying. NBFCs are a business model dependent on wholesale lending markets; they are the borrowers and then we lend it to retail or wholesale customers. And, wholesale lending markets do tend to be a little bit capricious and there can be times when they are going through some challenges and create a life threatening situation for NBFCs. We have seen liquidity side challenges happen in a few NBFCs in the last few years, and hence from a long-term sustainability stand point having a stable source of funding in terms of deposits, become important for a large NBFC.