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Q. Let me first congratulate you on receiving the regulator’s approval for the first-ever merger in the small finance bank space. It was perhaps on the expected lines as the merger looks very synergetic between the two partners, isn’t it?
A. No, no, I don’t think that we were so sure about it because you know it’s a regulatory approval, ie, an approval from RBI under section 44. But I’m so happy that the regulator really moved so quickly. We applied in November and within 120 days they are able to give us this kind of approval. I think the credit should go to the board and both the teams because it is not only about the application process but I would say that it is the last seven years’ journey.
Q. With the Reserve Bank of India giving its consent to the AU-Fincare Small Finance Bank merger, what are the immediate tasks the bank management has on the plate?
A. RBI has given the permission to get merged with effect from 1st of April 2024. So, we have a good three weeks. Now, it is about how technology gets integrated because that’s the starting point. If we don’t have a
technology integration with the Fincare team, it won’t be an integration in the real sense. Once we get that integrated, we need to address people because there will be a lot of anxiety around people, as the entire 15,000 team members will be coming to one unit now which is AU SFB. The concerns related to their career clarity, job clarity and their position need to be addressed. We also need to get the entire balance sheet merged from 1st April. And then, of course, the most important thing in my opinion is how we can communicate to their
customers and our customers that we have become stronger, taller and we have more options for them now. I think communication with customers is very important. From a business perspective, the highest priority would be to integrate the deposit franchise. In a few weeks after the merger, the focus would be on how we can make AU product suite available in Fincare branches and erstwhile Fincare customers.
Q. How long will the integration process take?
A. I admit it will take close to nine to 12 months at least, you know, to get this whole integration of technology, people, branches, customer communication. It is not an overnight job.
Q. What are the benefits you will derive from this merger, besides your entry into the South and foray in microfinance?
A. Of course, the very apparent benefits are getting into the South, and we are getting the microfinance assets, you know and we get a decent size bank in us.
Generally bank mergers do not happen so voluntarily and so I would say, it is a very happy merger.
There are a lot of intangible benefits, you know, which we might not be able to communicate to you as of now. But I think there’s a very strong signal about the governance and compliance practice in both the banks. It’s a strong statement to the public at large that AU is a very stable franchise. You can really trust us, bank on us. The merger will open up a lot many things for us as we move forward in the journey of banking.
Q. What will be the next major milestone you would like to achieve, getting a universal bank licence?
A. We are not looking for any kind of milestone. Honestly, after the small finance bank licence in 2015 September, I don’t think that any more milestones are required. So from last good nine years now — seven years as the bank and two years in the transition time — we are enjoying the journey.
I believe that there will be a time in the future when we will become eligible in terms of becoming universal. So, we are not in a hurry. Honestly, we don’t want to push our envelope. But I believe that the kind of skill we are getting in, the kind of segment we are in and the kind of governance structure or the compliance practice we have in this bank, and the kind of transparency we have shown over the years, will get us to that level.
Q. Given your prime expertise in financing vehicle loans, especially old vehicles, you would obviously like to replicate your model in the South. But the southern market may be a different ballgame since several non-banks lenders are quite active in this space there. What would be your strategy to ward off competition?
I always tell my team that in cricket when you go and score runs away from your home turf then you are a real good player. Rajasthan is our hometown, but if you perform in Maharashtra, if you perform in Tamil Nadu, if you perform in West Bengal then we will become the number one bank in this country in years to come.
I think the South market has its own special challenges and that is why we have acquired one bank which has south domination. So by this distribution available now, we can have the opportunity through cross sale. We will have an opportunity to bring in our subject expert there, and will play on that strength.
Q. You have a presence in the West, North and now in the South. What are the plans for the East?
A. The bank needs to grow very rationally and very responsibly. As I already told you, we are not in a hurry. We will take step by step in terms of our growth direction, and we are already at around 25% growth each year, year
Let’s build this more in the southern market and maybe after five years we will look at the East. Because neither East is going anywhere, neither we are going anywhere. We have a lot of patience in our overall outlook. Banks are really not meant for decades, they are meant for centuries. We need to be more mature. We should be holistic. We should be more knowledgeable to really learn to run a bank at a scale, you know, because it has its own challenges.
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