In a bid to expand banking services to more people and small businesses, the Reserve Bank of India on Thursday issued final liberal guidelines for companies seeking to set up payments banks and small finance banks.
Sunil Agarwal, Managing Director of SE Investments one of the companies that will be benefiting from this move, as the company plans to convert to a small finance bank.
As they comply with most RBI norms, the board will take final decision next week, he says in an interview to CNBC-TV18.
Below is the edited transcript of the interview:
Q: Has the company internally discussed whether small or payment banks would be an opportunity for you and what would be the way forward if in case it is?
A: We have had a small meeting of the key managerial persons today morning. Looking at the guidelines which were released late night, on the first stance it looks like that we should consider to convert ourselves into a small finance bank.
Our technical team is currently preparing notes and comparing the data what is required and where are we standing but looking at the first glance of the guidelines which have been issued by RBI we are at a fairly advanced position and we are complying with many of the terms which they have proposed.
So, there is a fair chance that the board when we meet next week, take the final decision. We are proposing a board meeting and hopefully we will keep the authorities and the regulators informed about the development on this part.
Q: I just wanted to come to the loan size that SE Investments disperses at this point in time because one of the key things about small bank licences is that 50 percent of your loans have to be under around Rs 25 lakh. So, would you comply or would there be some conversion that you will have to undertake?
A: We just run a very broad number on that. We just looked at our database and I can say we are not very far from 50 percent; we are almost there.
Q: What would it be at this point?
A: We are around 45-46 percent.
Q: One of the other things that was brought up was that there would be no regulatory forbearance in terms of NPL recognition. So, that means that if it is a small bank licence we do understand that the NPL recognition will have to be 90 days as oppose to the transition that the NBFCs are allowed at this point in time up to FY18. Would that be a problem for you at all?
A: No not at all because we have been writing off the NPAs as bad debt for last 15 years on this date of the balance sheet. We have been providing 100 percent provision writing off and we were continuing with our recovery efforts. So, I can tell you that the 90 day bucket of SE Investments default and the 180 day bucket does not have a large variance; it is only in decimal points. It is about 0.3-0.4 percent difference, so, 90 days NPA that RBI has allowed us as an NBFC to comply by 2018 we are not very far off from there. We are happy with doing that 90 days.
Q: All the other norms that you spoke about in terms of the internal calculation that you have done what do you comply with and what don’t you comply with?
A: Net worth we are very comfortable because we are almost at Rs 500 crore as per the last audited balance sheet. Our CRR, we are okay with that because we do not have any kind of public deposits or anything. Priority sector lending, large part of our portfolio is in priority sector lending so we are fairly at a comfortable position. The technical team and our CFOs, etc are at the moment looking and reading and trying to catch the data. So, by the end of next week when the board meeting takes place we will be at advanced level.
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