India: FirstRand Bank Focuses on Urban Unbanked

Aug 2014
India, August, 19 2014 - Current pilot includes going to smaller, specific areas such as Hill road in Bandra and Lokhandwala in the western suburb of Mumbai instead of going to larger areas

South Africa’s FirstRand Bank has decided to focus on the urban unbanked section to expand its reach in India instead of chasing the growing affluent class where the competition is more intense.

“We are trying not to operate just like any other bank but we are trying to carve out our niche. So we are investing in some pilots to see how successful we are. One pilot that we are working on right now is called easy banking. Easy banking is banking the urban unbanked. In this segment you can appoint business correspondents and open transactional account for the unbanked,” said Rohit Wahi, chief executive officer (CEO) and country head, FirstRand Bank. The South African lender, which operates through a sole branch in Mumbai, started operations in April 2009.

He explained that the current pilot includes going to smaller, specific areas such as Hill Road in Bandra and Lokhandwala in the western suburb of Mumbai instead of going to larger areas. “We started these pilots in June. Since it is just two months old, it is difficult to say how long we would be running it or what the targets are. But we are trying to bank all the shops and the small businesses in these areas and trying to give them PoS (point of sale) machines, credit facilities and transactional services etc,” added Wahi.

Earlier, the bank had undertaken a similar project in Dharavi, one of the largest slums in Asia. This pilot project was started in October 2012 and as of now the bank has opened 65,000 bank accounts in that area. Apart from this, the bank also records approximately 70,000 transactions via its automated teller machines (ATMs). Now, the bank is also focusing on cross-selling insurance, remittance and micro lending products to the customers in this area.

FirstRand Bank has also started doing micro-personal loans. The ticket sizes of these loans are between Rs 20 and Rs 30,000. It is doing it in collaboration with another microfinance institution.

Wahi agrees that going area by area is a slow process for a bank but he is confident that this is a good strategy. “I am a single branch operation and I can’t get licences for more branches that easily. So we are doing these pilots now and see how it works, if it works fine then we can go to 20 areas in one go.”

In order to grow further, the lender is keen to take up the wholly owned subsidiary (WOS) route in India but believes that it is still too early for them considering its present size in India.

“Eventually, we would like to take the WOS route if we want to grow in India. So we are very open to that idea. The question is when to do that. Right now we are not in a space to evaluate as we are not ready for it. I need to tick off all my pilots and then see where all and how all can we grow and then we will see,” said Wahi.

At the end of the last financial year, the bank posted a net loss of Rs 76.75 crore. The balance sheet size of the bank at the end of the last financial year was Rs 1,350 crore.

In 2013-14, the lender’s parent had infused Rs 130 crore  into the bank. Wahi said another round of capital infusion by the end of this financial year might be needed but will depend on if the existing capital depletes at a faster rate than expected.


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