Capital Small Finance Bank opens 10 branches in Punjab; to add nine more in FY17

Capital Small Finance Bank, India’s first small finance bank, was launched here on Sunday. It opened 10 new branches on its inaugural day.

The Jalandhar-headquartered bank had been operating as Capital Local Area Bank since January 2000 with 47 branches in five districts of Punjab.

It is among the 10 entities that were given the in-principle approval by the Reserve Bank of India (RBI) to set up small finance banks.

While inaugurating the bank, Nirmal Chand, regional director of RBI, Chandigarh, said it was a historic day for the banking sector in India as it would be reckoned as a day when small finance banks were introduced into the banking system.

“We have regional rural banks, cooperative banks and other small entities, besides a giant network of public and private sector banks. But, there is a huge void in the banking sector,” he said.

Chand noted that India has seven branches per 100,000 population compared with 40 branches per 100,000 population in developed countries. According to him, this gap can be bridged by small finance banks.

“The financial inclusion aims to have one bank account per member of the family. But, there are many families those have adult members without a bank account. Cent per cent financial literacy means one bank account per adult. Small banks can tap this population. Independent studies have revealed that around 90 per cent of the micro and small businesses have no access to the formal mainstream financial institutions. Since their ticket size is small, these banks can bring micro and small entrepreneurs into their fold,” Chand added.

Sarvjit Singh Samra, managing director of Capital Small Finance Bank, said the bank’s transition from a local area bank into a small finance bank has removed the geographical barrier of expansion.

Earlier, the lender’s operations were restricted to five districts in the state – Jalandhar, Hoshiarpur, Kapurthala, Amritsar and Ludhiana. Now, the lender can expand in any part of the country.

Samra, however, plans to grow in a phased manner. In the current financial year, the bank would consolidate its in Punjab by adding 29 branches. Out of this, 10 were opened on Sunday.

The bank’s business is projected to increase four-fold from Rs 3,000 crore as on March 31, 2016 to Rs 12,000 crore and branch network to 216 by March 2021.

Samra said that under RBI’s statutory guidelines, small finance banks should lend at least 50 per cent of their loans to an average ticket size of below Rs 25 lakh. For Capital Small Finance Bank, exposure to small ticket borrowers is 60 per cent, he added. The bank’s priority-sector lending, too, is higher at 79 per cent of total advances against the RBI norm of 75 per cent.

Being the only bank with seven-day operations in rural areas, Capital Small Finance Bank expects to achieve its targets as planned.

India’s first small finance bank launched