One of the country’s largest non-banking finance company (NBFC) Shriram Finance Ltd plans to grow its fixed deposits from the current Rs 32,000 crore and talks are on to raise long term funds from international markets, said Umesh Revankar, Vice Chairman.
According to him, the merged company will now look at personal finance and loans to micro, small and medium enterprises (MSME).
He also said turning into a bank with the merger of two other group NBFCs will not be profitable owing to maintenance of statutory liquidity ratio (SLR) for first four years, increased salaries to the staff and reduction in the net interest margins (NIM).
It may be recalled that commercial vehicle financing major Shriram Transport Finance Company, two-wheeler and MSME financier Shriram City Union Finance and Shriram Capital Ltd have been merged to form Shriram Finance.
After the merger Shriram Finance, is a diversified player with a net worth of Rs 40,900 crore and Assets under Management (AUM) of Rs 1,71,000 crore catering to over 6.7 million customers across India.
Speaking to reporters here Revankar said the company’s liability si de or fund sources include retail fixed deposits, non-convertible debentures, securitisation of priority sector loans, bank loans and external commercial borrowing (ECB).
He said the retail fixed deposits are about 20 per cent of the company’s balance sheet and this will be increased to about 25 per cent.
Revankar said the company plans to grow its retail fixed deposit portfolio by 25 per cent in a couple of year’s time from the current quantum of about Rs 32,000 crore.
Queried about the company’s eight per cent net interest margin (NIM ) much higher than that of the banks Revankar said the lending rates are based on the company’s cost of funds as well as the risks involved to lending to the unbanked populace.
He said, unlike banks that have low cost of funds in the form of current account, saving account (CASA), the NBFCs do not have that.
Revankar said while lending to unbanked or underbanked populace a higher cushion is required for NBFCs.