Ujjivan Sees Numbers in Mass Banking
Ujjivan SFB, which formally launched ops on Monday, aims to become universal bank in 5 years
Bengaluru: Ujjivan Small Finance Bank will aim to become a conventional bank in half-a-decade or so, its CEO indicated, as the newest small finance bank formally launched operations on Monday.
Ujjivan’s aim is to serve the massmarket retail customers and there are some limitations on a small finance bank to do so, Samit Ghosh told ET on the sidelines of the launch event here. A small finance bank must keep a ₹ 25-lakh limit on half the loans it hands out. Also, a quarter of its branches should be in unbanked areas, which are predominantly in rural India. Both are restrictions for any lender that seeks to tap the credit demand of the nation’s thriving middle class to buy homes, vehicles and consumer durables.
“In five years, we would like to be a mass market retail bank and will apply for a universal bank licence if there are restrictions as a small finance bank,” Ghosh said.
Sequoia Capital and International Finance Corp-backed Ujjivan Financial Services started as a microfinance firm in 2005. Last year, it raised ₹ 887 crore in an initial public offering. It was among 10 applicants to have received central bank approval to become a small finance bank. It is the fifth to start operations.
On Monday, Ujjivan opened five branches in Bengaluru. It will now offer savings and deposits, funds transfer, and other banking services such as debit cards and ATMs.
Ujjivan had about 8,000 employees as an MFI and added 2,000 more as it transitioned into a bank. It has built a call centre in Bengaluru and will set up another in Pune.
Ghosh said while the rate of interest on savings account and fixed deposits will be competitive, it will lower interest rates on loans only after a few years, since operating costs will be high in the initial years.