SBM bets on tie-ups to grow India ops; not to add branches

SBM Bank India, the wholly-owned subsidiary of the Mauritian government’s SBM, is betting on partnerships with fintechs and non-bank entities to grow its business here and is not interested in growing its branch network like DBS Bank India did with an acquisition, a top official has said.

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SBM Bank India wants to grow its business through granular liabilities collection and booking fees by aiding in various banking transactions, its managing director and chief executive Sidharth Rath told PTI. It can be noted that DBS, the only other wholly-owned subsidiary in the Indian banking sector, acquired struggling private sector lender Lakshmi Vilas Bank last year, which gave it access to 563 branches. Foreign banks operate in India either as a wholly-owned subsidiary or through branch model.

“DBS has their own strategy. Yes, they have gone for inorganic growth we are also doing inorganic but through partners, let me put it this way,” Rath said. When asked specifically if it will be interested in tie-ups or deals where equity changes hands which are otherwise referred to as ‘inorganic’ growth Rath said at present, it is focused to grow through technology-led and digital-led platforms.

“Going forward, one doesn’t know what it (SBM) would be, how it is going to look, but it is going to be under them (parent State Bank of Mauritius) only,” he said, not discounting the possibility of a strategic partnership, a public issue or even an acquisition like DBS. The bank is not keen on adding to its brick and mortar branch network, which right now consists of six outlets in metro cities and two in unbanked rural areas, Rath said, adding that it may at best look at adding two more branches in FY22.

The strategy for the new fiscal year will be to scale up on the foundation of the partnership-led model by getting new customers or forging new tie-ups. A large part of the focus is on driving retail business, which consists only 10 per cent of the Rs 3,500 crore loan book as of March 31, and take it to 25 per cent by end of the next fiscal, Rath said. Neeraj Sinha, the head of consumer and retail banking at SBM explained that there a slew of fintechs who have developed the right platform, user interface and also a customer base, which are looking at growing, and can help by tying up with a bank.

Being an upstart venture, SBM is open to tie-up with such entities so as to create win-win proposition for both the partners and also the end customer, he said, giving out details of some of the over 20 partnerships it has. He said as part of one partnership, it has tied up with an entity which will help connect it with those having credit rejections repeatedly. Against a fixed deposit with the bank, SBM will lend the person and help her build a better credit history over a period of time, he said.

Similarly, given the working capital shortage with small businesses, it has a tie-up where a non-bank gives it access to those desirous of getting the card. The customer makes a fixed deposit (FD) with the bank to get the card and enjoy a 30-day credit like the one available for any consumer, he said.

Sinha said that already, over a fourth of its current account deposits are courtesy such tie-ups and the number of customers onboarded through such pacts is 1.5 lakh. “I am not competing with them (the partners), and hence, I am also the natural choice for the fintechs to come and work with. Lack of size becomes an advantage for me there. This is a typical challenger bank strategy,” Sinha said.

The bank’s overall balance-sheet including both advances and deposits stood at Rs 6,000 crore as on March-end, the share of the low-cost Current Account Saving Account (CASA) deposits was 21 per cent and the capital buffers were at 24 per cent.
When asked if the bank will need any capital, Rath hinted that there will be no need, pointing out that one needs to deliver on the capital as well. He, however, added that whenever needed, the parent will be giving the capital.