Suveer Kumar Gupta, MD & CEO, Shivalik Small Finance Bank.

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The outbreak of Covid-19 and the ongoing challenges associated with the pandemic induced several changes across the industries around the world and the BFSI sector is no different. While financial institutions are trying to capture the dynamic changes in customer behaviour post the Covid outbreak with digital offerings Small Finance Banks, in particular, are underlining the cause of financial inclusion through tech-driven deployments. To understand the pivotal role played by Small Finance Banks in meeting the financial requirements of undeserved segments, Rashi Aditi Ghosh of Elets News Network (ENN) interacted with Suveer Kumar Gupta, Managing Director & Chief Executive Officer, Shivalik Small Finance Bank.

Excerpts of the conversation:

1) The BFSI industry has evolved digitally post Covid. How did you leverage the opportunities induced by the pandemic?

Banking and payments, which are important pillars of the economy, have experienced a significant increase in digital offerings and adoption. While the banking industry is not new to adopting digital, the pandemic has hastened the adoption of digital technologies, with far-reaching consequences for the future of not only the banking sector but the entire financial ecosystem. The regulatory regime is highly conducive to digital banking. Banks understand the benefits such as better efficiency, cost-effectiveness, better risk management by use of digital banking. Because of pandemic, the customers have also become more aware and open to digital channels.

Indian masses have accepted the use of pure simple digital means for small transactions and the same thing is now getting reflected in all other banking activities with enhanced penetration on mobile banking as well as Internet banking. The growth in UPI transactions is phenomenal and is on track to cross $ 1 Trillion by this financial year-end. Shivalik Small Finance Bank is present on all major digital payment channels such as NEFT/RTGS, IMPS, UPI, etc. Our Internet and Mobile banking channels have seen high penetration amongst our customer bases. We are making full use of technology right from the start of the customer’s journey. Our customer acquisition process is fully digital and almost all accounts opened in the bank are paperless. We are adding and serving customers digitally. We have been tech-ready, and we’ve built tech APIs and kept everything on the cloud which has helped us remain agile and top of the line. Our API interface allows us to partner with Fintechs and other players in the BFSI space to bring in better products and services to our customers.

2) How is India performing in terms of small finance banks? What level of growth have you witnessed in the last two years?

Small finance banks in India were established to encourage financial inclusion. These banks are performing considerably well, and they have good potential all over India as financially excluded people are at large in India. According to rating agency ICRA, the small finance banks (SFBs) are likely to register a marginal improvement in the growth rate of their assets under management (AUM) in the financial year 2021-22 (FY22) to 20 percent from 18 percent growth witnessed in FY21. On the liquidity front, it said SFBs have been able to maintain a favourable asset-liability maturity profile supported by a shorter-tenor asset mix, a high share of non-callable deposits as well as long-term funding support from financial institutions like NABARD, SIDBI, and MUDRA. It expects SFBs to maintain healthy liquidity, especially given the uncertainty in the industry. Further, their access to the call/notice/term money market supports their liquidity. SFB also experienced a decline in its net interest margin in 2021 due to the difficult business environment and the reversal of interest earned on delinquent accounts.

Shivalik Bank became the first Small Finance Bank in the country that has transitioned from a cooperative bank. We went live as an SFB on 26th April 2021. As such we have been operational as an SFB for about 9 months. Our annual growth target for the current financial year was to grow the business by 50%. After being operational as an SFB, our business has grown by roughly 20%, which is a good number since this is in the nine months itself and with one quarter being impacted by covid. We are on track to achieve a strong growth rate this year. Our customer base has exceeded half a million.

3) What are your plans pertaining to capital raise? How are you planning to invest it?

We are presently raising our first round of capital amounting to INR 100 crores and expect the process to complete within this financial year. We are looking at both strategic and financial investors who are aligned with our journey of a digital-first bank serving the retail segment. This would be growth capital for the bank and would be used for the following:

i) To fuel future growth. As the balance sheet expands, we will continuously need to add capital

ii) We have completed a large tech transformation and our tech systems are modern and agile. However, we will continuously need to invest in tech platforms to ensure they remain top of the line

iii) We will continue to add talent in the right places in the organization to ensure we scale the talent pool in line with the scale of the organization.

4) What are your views on hybrid work culture? Do you see it’s continued relevance in BFSI sector?

The pandemic has influenced how all businesses, including banks, see work and office space. It not only brought in a revolution in the work-from-home (WFH) movement, but it also brought in a fundamental shift in employee behaviour and mindsets – a trend that will have a long-term and significant impact on the way we work from now on, even after the pandemic has passed.

BFSI is one industry where hybrid work culture works smoothly. It provides cost-effectiveness to organizations, in terms of reduced infrastructure requirements at the ground, and better flexibility to the workforce. Employees, especially the young generation, prefer flexibility, and as such, hybrid work culture is an attraction for young talent. We at Shivalik SFB fully aligned that wherever technology permits we allow hybrid working. We have done it during pandemic and continue to do so.

5) What are your digital expansion plans?

Shivalik Small Finance Bank is working on a three-pronged approach for digital expansion.

i) Enhancement of customer-facing tech which includes our digital offerings such as Internet Banking, Mobile Banking, payment channels, assisted digital services including micro-ATM based banking services, etc.

ii) Using more and more tech for all our internal processes such as paperless account opening, digitizing the internal workflows in different departments, use of strong tech systems for all communication including the conduct of meetings, using MIS and analytics systems, etc.

iii) We are committed to working with partners using our API stack to seamlessly deliver better products and services to the customers online.