Synopsis: Fino Payments Bank is actively pursuing a transition to a Small Finance Bank (SFB) license, aiming to expand its services to include credit offerings while maintaining its core fee-based, liability-first model. With a robust network of 1.8 million merchants, the bank plans to target the lower-end SME segment for lending, leveraging its existing infrastructure to serve underserved markets.
Fino Payments Bank has been in continuous discussions with the Reserve Bank of India (RBI) regarding its application for a Small Finance Bank (SFB) license, submitted in December 2023.
This strategic move is designed to enable the bank to introduce credit services as an additional offering, thereby broadening its financial product suite.
Despite this expansion, CFO Ketan Merchant emphasized that the bank remains committed to its core fee-based, liability-first model, ensuring that the transition aligns with its established business philosophy.
Targeting the Lower-End SME Segment:
With an extensive network of 1.8 million merchants, Fino Payments Bank is well-positioned to venture into the lending space, particularly focusing on the lower-end Small and Medium Enterprises (SME) segment.
This approach aims to address the credit needs of underserved businesses, leveraging the bank's existing merchant relationships to facilitate lending and loan collection processes.
Merchant highlighted that this transition would not fundamentally alter Fino's strategy; instead, the bank will continue to scale its Current Account Savings Account (CASA)-led growth, digital services, and payments-based profitability.
Financial Performance and Growth Drivers:
In the third quarter of the fiscal year 2024-25 (Q3 FY25), Fino Payments Bank reported a 25% year-on-year increase in revenue, reaching INR 461.3 crore. This growth is attributed to several key factors:
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CASA Growth: The bank's CASA base experienced a 50% growth in the last quarter, driven by the addition of approximately 8.3 lakh new accounts, with a new banking account opened every 10 seconds.
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Digital Transactions: There was a fourfold quarter-on-quarter surge in digital transactions, reflecting the bank's successful digital transformation initiatives.
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Cash Management Services (CMS): CMS has significantly contributed to both revenue and profitability, underscoring the bank's diversified income streams.
These elements, combined with a strong focus on fee-based income, have reinforced Fino's business fundamentals and positioned the bank for sustainable growth.
Regulatory Preparedness and Future Outlook:
Fino Payments Bank has been proactive in its engagement with the RBI, addressing queries related to its SFB license application.
Upon receiving in-principle approval, the bank anticipates an 18-month period to complete the transition to an operational SFB, with aspirations to expedite this process within a year.
Preparations are underway to adapt the bank's team structure, technology platforms, and capital allocation to meet regulatory requirements and support the expanded service offerings.
Conclusion:
The transition to a Small Finance Bank represents a strategic evolution for Fino Payments Bank, enabling it to offer credit services while steadfastly adhering to its core fee-based, liability-first model.
By leveraging its extensive merchant network and focusing on the lower-end SME segment, Fino aims to address the credit needs of underserved markets.
Coupled with robust financial performance and proactive regulatory engagement, the bank is poised for a successful transition that aligns with its long-term vision of sustainable growth and financial inclusion.
Disclaimer: This article is for informational purposes only and should not be construed as financial or investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
