R Baskar Babu, Managing Director & CEO, Suryoday Small Finance Bank
Suryoday Small Finance
Bank (SSFB) has completed a shade more than a decade as an entity in two avatars — the past three years as a bank and eight years prior as a micro-finance
institution (MFI). It has ramped up business at the bottom of the pyramid, and believes the business model is sustainable and scalable. R Baskar Babu
, the bank’s managing director and chief executive officer, spoke to Raghu Mohan
. Edited excerpts:
How do you look back on the journey so far?
When Suryoday was set up as a micro-finance
institution (MFI) in 2009 with five branches in Pune, we could not even imagine applying for a banking licence — they were issued once every 10-15 years. But then came differentiated licensing for small finance banks
(SFBs) at a time when the digital revolution was taking off in the banking space. Across our customer segments, the household has become financially digital. But our intent is the same as that at the time of our genesis as an MFI, and the learnings from back then have helped us.
By and large, our customers who were depositing small amounts of cash and withdrawing it, did not feel welcomed by bank branch supervisors. So, we came up with the idea of distributing piggy-boxes to customers who started saving small amounts on a daily basis. The experiment was so successful that there were some cases where the boxes were overflowing. And that’s when the realisation struck that we still need a bank to deposit, even as queues and referrals for opening accounts seemed like insurmountable hurdles. We also sponsored some of our customers to become customer service points of banks.
This was the first step towards developing a meaningful relationship with customers.
Can you give us an example of an offering which you tailored for your clientele during the pandemic?
We are among the few players in the industry who have launched an overdraft product for this segment with a limit of Rs 5,000 or Rs 10,000. It is offered at a highly competitive rate of 18 per cent. This is a revolving limit available at any point of time, where you repay a certain percentage whenever you have a surplus. In fact, not many even in the middle- and upper-class income segments may be using, or are aware of using overdrafts, instead of term loans as an option. We want to stay true to our objective of meaningful banking and are continuously developing products in line with this thought. And we are also engaging in financially educating and empowering them so that they use it in the best possible manner.
Our vision is to educate our customers to opt for the Pradhan Mantri Jeevan Jyoti Bima Yojana, and Pradhan Mantri Suraksha Bima Yojana for the family. Apart from that, with the help of the savings mobilised with us and micro home-loans, they can avail of benefits under the Pradhan Mantri Awas Yojana as well. True financial inclusion was our starting goal and continues to be so, but the context has evolved to add many products.
In a highly commoditised market, how far is the SFB model a sustainable one?
The SFB model does not have any constraints, except that 75 per cent of our portfolio has to be in priority sector loans (PSL) compared to universal banks’ 40 per cent. Apart from that, there are some restrictions on forex transactions which actually does not fit in the scheme of things anyway, given the segment we are catering to. To that extent, there is nothing which comes in the way of scaling up, except for the PSL. SFBs are used to high-volume, low-value transactions, which a regular bank may not be used to. So, the model itself is very different and hence, sustainable.
To what extent is the SFB model scalable?
We have completed more than three years as a bank and 11 years as an institution. In the three years as a bank the net worth has gone up by more than five times and assets more than tripled. As of July 31, 2020, our customer base was 14.3 lakh and we had 482 branches. We currently offer a variety of asset and liability products and services designed for inclusive finance and general banking customers. Our loan book has grown at a compounded annual rate of 46 per cent, with deposits at 90 per cent during FY18-20.
The model is scalable and can be immensely successful, if we focus on meaningful deposit mobilisation, asset diversification, digitisation, setting up the right delivery channels for optimisation of resources and expanding reach. Plus, a good governance and risk management structure.
The Reserve Bank of India has said that SFBs can aspire to be universal banks. Is this an option you will look at?
We will — whenever there is an opportunity and it presents itself, which is five years after successful operations as an SFB. A universal bank can cater to many more segments. Also, it may be a natural graduation and a natural road map for all SFBs, but our focus will remain on our core customer segment.