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Bajaj Finserv, the holding company for non-banking financial company (NBFC) Bajaj Finance, has applied for a banking licence. Sanjiv Bajaj, managing director, Bajaj Finserv, in an interview with Manojit Saha, he says the company already adheres to certain norms applicable for banks. Edited excerpts:
Bajaj Finserv has registered profit growth of 43 per cent at Rs 279 crore, while Bajaj Finance, its lending arm, saw robust growth in revenue. What has been the strategy to grow the loan book amid a slowing economy?
We have three businesses—life and general insurance and finance, of which the life business has slowed. There other two have done well. Bajaj Finance has a diversified book with consumer, small & medium enterprises (SME) and commercial loans.
The consumer segment has done well, registering 41 per cent growth in the first quarter. The SME space, too, has fared well. There is, however, a slowdown in the commercial loan business, which is mostly infrastructure and commercial equipment loans. This was a conscious decision taken about a year and a half ago.
You have significant exposure in the consumer finance business. Do you see the asset quality under stress?
Our net NPAs (non-performing assets) are 0.25 per cent, one of the lowest in the sector, while our loan loss coverage is 80 per cent. NBFCs don’t have to declare their provision coverage ratio. For banks, it is mandated at 70 per cent. Our provisioning norms very similar to banks; we provide for unsecured loans if they are due for 90 days, not 180 days. Overall, business is run very conservatively. We are not seeing any significant stress in the consumer finance business.
In the SME sector, banks are seeing asset quality deterioration, and this has made them cautious. But Bajaj Finance has seen healthy growth of 39 per cent in the first quarter, though you have seen asset quality worsen in this segment.
No, we have not. We are small, compared to banks. We mostly have secured loans, and for high-end customers. For example, our average ticket size for loans against property is Rs 2 crore…In the case of such customers, defaults are less.
Are you planning to enter the gold loan business?
We launched the rural lending business in June. Through this, we would give loans against gold. The rural finance division would be a part of Bajaj Finance.
Bajaj Finserv has applied for a banking licence and plans to convert Bajaj Finance into a bank. If you secure a banking licence, what would be your focus area?
The key is to develop a liability business and a good-quality asset book. On the asset side, we are already built a diversified book.
Isn’t converting Bajaj Finance into a bank a challenge?
We have to take short-term pain for long-term gain. We have no discretion; we have to follow all RBI (Reserve Bank of India) rules.
How do you plan to pare promoter stake in Bajaj Finserv, as required by the new bank licence norms?
Yes, we have to do that. It would be done after we receive the in-principle approval.
In the bank licence guidelines, RBI emphasised financial inclusion. How do you plan to approach the issue?
Our team has worked on a plan for financial inclusion, but I cannot share the details about that.
Berkshire India is planning to wind up operations and stop online sales in the country. As it is your corporate agent, do you see any challenge to the sale of your products?
Berkshire has two businesses in India. One is a very small one—acting as corporate agents for online sales. It realises in India, this is a very small business. Therefore, it decided to discontinue it. In India, its primary business is reinsurance. We are their largest partner in that area. That business will continue.
