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Manappuram Finance may consider converting its latest acquisition, Asirvad Microfinance, into a small finance bank.
The Kerala-based non-banking finance company had signed an agreement to buy a majority stake in the microfinance company in October, 2014 and is expected to complete the acquisition in next couple of weeks. It is expected to pay 1.5-1.7 times of the book value of Asirvad Microfinance's shares.
The Reserve Bank of India (RBI) released its final guidelines on licensing of small finance banks on Thursday. Companies willing to set up such banks can apply for a licence till January 16, 2015. An external advisory committee will evaluate the applications while the decision to grant an in-principle approval will be taken by RBI. The in-principle approval will remain valid for 18 months.
"Asirvad Microfinance is qualified to become a small bank. The board of the company will need to take a decision," VP Nandakumar, managing director and chief executive officer of Manappuram Finance, told Business Standard.
As per the final guidelines, the minimum paid-up capital for small finance banks must be Rs 100 crore. These banks will have to extend 75 per cent of their adjusted net bank credit to the sectors eligible for classification as priority sector lending. Also, at least 50 per cent of small finance banks' loan portfolio must constitute loans and advances of up to Rs 25 lakh.
Asirvad Microfinance current loan portfolio is close to Rs 200 crore. It has 150,000 customers across Tamil Nadu, Karnataka, Andhra Pradesh, Kerala and Gujarat.
Nandakumar also clarified that Manappuram Finance has not shelved its plan to set up a universal bank. It was one of the 25 companies that had applied for a universal banking licence, which was being offered for the first time in a decade. RBI decided to grant in-principle approval to only two new players – Bandhan and IDFC – earlier this year. However, the central bank has kept the door open saying it will use the learning from its latest licensing exercise to revise the guidelines appropriately and move to give banking licences more regularly, almost on tap.
"We will consider (applying for a universal banking licence) once the (revised) guidelines come out," Nandakumar said.
RBI has said that if a small finance bank aspires to convert into a universal bank, such transition will not be automatic. The small bank will need to meet the minimum paid-up capital and net worth requirement as applicable to universal banks. Also, the regulator will review its track record and performance as a small finance bank.
