Fino Payments not planning to turn into small finance bank 'right now': CEO

Company is only profitable payments bank and 'lot of things need to settle down first' for it to consider seeking a licence for conversion, says Rishi Gupta

Fino Payments, India’s only listed payment bank, is not keen to become a small finance bank immediately though it will be eligible to be when it completes five years in June 2022.

The Reserve Bank of India (RBI), while accepting several recommendations of an internal working group that reviewed norms on ownership and corporate structure of private lenders, said last month payment banks would be eligible to become a small finance one when they complete five years of operation. The conversion is not automatic, requiring the banking regulator’s approval.

“Right now, there are no plans for converting into a small finance bank,” said Rishi Gupta, managing director and chief executive officer of Fino Payments Bank.

“Right now the plan is to push more on payments and liabilities--the business which we are currently doing. There is a lot of headroom in the existing business itself,” Gupta told Business Standard in an interview.

Fino, which is mainly into domestic remittance business, started operations in 2017 and listed in the bourses last month following an initial public offer.

Payments banks are not allowed to lend and earn a fee from remittances. They are allowed to accept public deposits, but only up to Rs 2 lakh as savings or current account deposits.

A small finance bank licence would allow Fino to lend and offer a range of deposit products. On why Fino is not keen to apply for the licence, Gupta said, “Just that right now DNA is more on payment and the other businesses, not on credit business. There is a lot of growth opportunities in our current businesses itself… and there is no credit risk.”
 

Fino reported revenue growth of 36 per cent year-on-year for the first half of the current financial year, to Rs 448.39 crore. Profit after tax for the same period grew by 73 per cent to Rs 11 crore. “We are doing good both on top line and bottom line. We are the only profitable payments bank,” Gupta said.

“Credit is also going through a bit of a challenge in the last couple of years. Lot of things need to settle down first. We will have to see after one or two years how the situation evolves, then we will decide.” 

The coronavirus pandemic has hit small finance banks and micro finance institutions hard, as their non-performing loans surged in the last one-and-half years. These companies target borrowers who are at the bottom of the social pyramid, a section hit hardest in the pandemic and lockdowns to contain it.

Fino has tied up with non-banking finance companies to offer loans to its customers, earning a fee for the service.

“Only thing is customers are also asking for credit. They are saying we are coming to this bank,' why don’t you offer us credit'. We have tied up with NBFCs. We are learning through the processes, we will see how the system evolves,” he said.

Fino has tied up with three NBFCs: one for gold loan, one for consumer loan and one for merchant loan. The consumer loan size averages between Rs 3000 to Rs 10,000 while the loans to small businesses are in the range of Rs 15,000 to Rs 40,000.

Of the six payments banks that have started operations, three others are also on the verge of completing five years, or have completed five years of operations. Apart from Fino, the others are Airtel Payments Bank, Paytm Payments Bank and India Post Payments Bank. The two other payments banks that have started operations are Jio Payments Bank and NSDL.

While the working group proposed entry of large business houses in banking, RBI sidestepped the issue. Among the six payments banks, Airtel and Jio are owned by large business houses.