Liquidity crisis helped us grow deposits, biz, says Sanjay Agarwal

Sanjay Agarwal, managing director & chief executive officer, AU Small Finance Bank, speaks about the impact of liquidity crunch on his bank, expectations from the new RBI governor, products being offered from his bank and guidance for the second half of the current fiscal, among others during a conversation with Anurag Shah of Zee Business. 

What impact did the ongoing liquidity crunch in the banking sector have on your bank?

The crunch majorly had its impact on financial service providers like NBFCs, HFCs and MFI and those involved in short borrowing and long lending. It didn’t have any impact on the banks but helped them banks several corporate treasuries have pulled out their money from AMCs and parked it in the banks. We are a small bank, but saw an increase in our deposits; in fact, we surpassed our November deposit targets as it grew 10% more than expected. Apart from this, this crisis provided lending opportunities to us as many NBFCs and HFCs were not lending. 

What products are being offered by AU Small Finance Bank?

The main products that we have been doing since the past two decades are vehicle finance, where we are financing two-wheeler to 22-wheelers. Being a small bank, we want to have 50% of our loan accounts below Rs 25 lakh, and it stands around 60% at present. Therefore, we offer loans below Rs 25 lakh to businessmen, traders and service enterprise, among others. It has a 40% contribution in our loan books. Now, we have started home loan facility. We have introduced 28 products and this is something that will develop a sense that we are a true bank.

Your bank has performed well in H1FY19. Let us know about the guidance for H2FY19?

I think that we will grow by 35-40% due to the 28 products we have launched. But this is not one-way growth, and includes certain things like asset quality, IRR and RoI. 

Let us know about the capital that is available with your bank and if you looking forward to new funds?

We have raised funds twice in the past nine months. We raised Tier I from Temasek, a global investment company, by offering a 5% stake. We have raised Rs 500 crore under Tier II in the recent past. We have capital of around 18% and I feel that this fund is enough to keep the bank functional for the next 18 months. The second instalment from Temasek and internal profits will enable us to function till March 2020. Further, we will look at the kind of growth that we have achieved in these 18 months and plan the future, where we will need refunding between 2020 and 2021. 

Will this fund will be used for expansion purposes only?

Yes, it is a natural process. You need to raise Tier I or II capital when you want to grow 40% with a profit of 15%. So, every penny of the capital will be used for funding this growth. 

Name the geographies where you will be expanding your business?

We have 400 branches and 100 asset centres at present and we have no plan to expand in the curent fiscal.