Janalakshmi Small Finance Bank To Launch In The Second Half Of FY18
The microfinance company has received final RBI approvals for the launch of the small finance bank.
Janalakshmi Financial Services has received the final licence from the Reserve Bank of India (RBI) to set up a small finance bank. With all approvals in place, the micro-lender will convert to a small finance bank and begin operations in the second quarter of fiscal 2018, the company said in a press release on Saturday.
Janalakshmi is a 17 years old microfinance company which serves more than 80 lakh customers already. It was among the 10 entities granted in-principle approval in September 2015 to convert their operations into small finance banks - a differentiated banking concept introduced to provide small borrowers better access to formal finance. So far, at least such banks including Suryoday Small Finance Bank, Utkarsh Small Finance Bank, Equitas Small Finance Bank, Ujjivan Small Finance Bank and Capital Small Finance Bank have been launched.
Janalakshmi plans to set up 300 bank branches during the year to cover major locations across the country, it said in the release. The company is well capitalised and will focus on advanced technology to reach more customers, said Janalakshmi’s managing director and chief executive officer V.S. Radhakrishnan in a written statement.
We are excited about this and this will take us closer to our vision of financial inclusion in its true sense. We are fundamentally a unique organization with key differentiators such as primary focus on inclusion, significantly advanced technology platform and top-class management team. We are well capitalized with investments from world’s leading institutions which ensures seamless delivery towards our vision.V S Radhakrishnan, MD & CEO, Janalakshmi Financial Services Ltd.
After becoming a small finance bank, Janalakshmi will be able to provide financial services beyond microfinance such as a savings or a current account. Moreover, a small finance bank can provide various kinds of loans and cash deposit schemes.
According to the release, all existing customers of the microfinance company will automatically be moved to the small finance bank without any additional costs.
“Besides availing micro loans, they (customers) can also seek loans for their businesses or small medium enterprise, towards farming and for unorganized sector entities,” the release said.
Small finance banks were set up based on the recommendation of the Raghuram Rajan committee on financial reforms which suggested an experimental approach to banking through small private banks which can provide deposit facilities and offset their risk by being geographically focused.
Many small finance banks, such as Suryoday, have expressed their desire to do just that by focussing on their existing customer set for now and having moderate expansion plans, as detailed by the bank’s top management in a conversation with BloombergQuint earlier this year.
However, a lot of small finance banks have been offering higher interest rates to lure customer deposits -- a strategy that has been questioned by experts for having a limited shelf life.
Janalakshmi, in its media release, did not specify the interest rates it will offer on deposit products. It, however, said that it plans to focus on cashless transactions rather than relying on cash-based ATM or branch transactions.