Aditya Birla Financial Services Hasn’t Missed The Payments Bank Bus, CEO Says
Ajay Srinivasan believes the digital payments is a multi-decade opportunity in India.
‘Digital’ seems to be the new buzzword in the upper echelons of India’s government, with Prime Minister Narendra Modi and his cohorts declaiming the benefits of switching from a cash-dependent economy to a cashless one.
Indeed, mobile wallets and banks are reporting a surge in cashless transactions since early November when the government launched its cash-crunch inducing demonetisation. In this vein, the launch of the Airtel Payments Bank in November signalled that the payments bank bus has begun to roll.
Vijay Shekhar Sharma-promoted Paytm is also expected to launch its payments bank venture soon. It recently informed its customers that their Paytm wallets would be transferred to the Paytm Payments Bank Ltd., after it receives the necessary regulatory approvals. Once it is launched, the initial clashes in the battle for users will ensue.
So has Aditya Birla Financial Services, which is working on its own payments bank in a joint venture with Idea Cellular, already lost out on the early bird advantage in the payments bank space?
The company’s Chief Executive Officer Ajay Srinivasan, in an interview with BloombergQuint said its payments bank will be launched in the first half of the next financial year. A couple of months will not make or break the venture, he added.
India is 2 percent digital (payments). And therefore we’re on a long road in terms of digitising the country. And therefore a few months here and there I don’t think is going to be a big deal in terms of missing the boat. This is a multi-decade opportunity in India.Ajay Srinivasan, CEO, Aditya Birla Financial Services
The low switching cost for customers is the main reason Srinivasan is not worried.
“So I don’t think it’s going to be a question of someone coming early, grabbing customers and being happy and contented, saying I’ve got these customers, now nothing is going to happen with them,” said Srinivasan.
The Listing Of Aditya Birla Financial Services
In August, the Aditya Birla Group announced the merger of Aditya Birla Nuvo with Grasim Industries Ltd. As per the scheme, after the merger, the financial services division of Aditya Birla Nuvo would be merged with Aditya Birla Financial Services. Aditya Birla Group intends to then list Aditya Birla Financial Services.
“If everything goes as per plan, somewhere between April to June next year, calendar year 2017, Aditya Birla Financial Services will be a separate listed entity,” Srinivasan said, adding that the company was awaiting regulatory approval for the scheme.
The company has the option of raising funds before it launches its initial public offer, but it has not yet considered it, he said.
Credit Demand Has Not Disappeared
The cash crunch on account of the demonetisation has resulted in a slowdown in credit growth. Data released by the Reserve Bank of India on Wednesday showed that the loan growth of scheduled banks as on December 9 has slowed to 5.76 percent on a year-on-year basis.
I think we’ve seen from our own example, in our NBFC housing finance business that there was a slowdown. I think we’re starting to see that slowdown kind of improve. It’s still slower than we would have liked and we would have expected, but I think it’s going to come back.Ajay Srinivasan, Aditya Birla Financial Services
In an interview with BloombergQuint on Wednesday, Rajnish Kumar, managing director at State Bank of India said loan sanctions had not slowed, but disbursements had, as a result of the cash crunch.
Srinivasan subscribed to this view. He believes that once the availability of cash is normalised, there will once again be demand for loans, especially in the market for housing.
Today people are in a phase where they’re looking to see where the prices will settle. Everybody is expecting real estate prices will correct. So the rational buyer is going to say let me wait, let me see where house prices settle before I decide whether I buy or not. But that basic demand is not going to disappear.Ajay Srinivasan, Aditya Birla Financial Services