Fino Payments Bank Seeks SFB Licence From RBI After Board’s Agreement

Fino Payments Bank, a subsidiary of Fino Paytech Limited, has applied for a small finance bank (SFB) license with the Reserve Bank of India (RBI).

In a statement on Monday (January 8), the RBI mentioned that it had received an application from Fino Payments Bank under the “Guidelines for on-tap licensing” of SFBs.

In July 2023, the bank’s board approved the proposal to apply for an SFB license and also directed the formation of a committee to advance the reverse merger evaluation with its parent entity, Fino Paytech Limited.

At that time, Ketan Merchant, Chief Financial Officer, said, “Our SFB will be a Payments Bank++ model, different from existing players, wherein the fee-based income will constitute 75% – 80% of the revenue in the first few years of operation.”

Fino has around INR 600 Cr of net worth, while the minimum capital requirement for small finance banks is INR 200 Cr at present.

Fino Payments Bank started its business operations on June 30, 2017. It counts Bharat Petroleum, ICICI group, Blackstone, IFC, Intel and LIC as among its marquee investors.

As mentioned by the company in one of the earlier press statements, frugal innovation is the key that has given the fintech a leadership position in the middle of the pyramid, primarily serving emerging Indian customers.

The Mumbai-based bank operates on an asset-light business model that principally relies on fee and commission-based income generated from merchant networks and strategic commercial partnerships.

The bank’s platform facilitated more than 120.7 Cr transactions with a gross transaction value of over INR 2.55 Lakh Cr in the financial year 2022‐23. The bank turned profitable in the fourth quarter of 2019‐20 and has been profitable in subsequent quarterly periods. It registered a profit of INR 65.1 Cr in FY23.

In Q2FY24, the bank facilitated transactions worth INR 86,568 Cr, of which more than INR 23,051 Cr were processed digitally. The bank registered a PAT of INR 19.5 Cr in the second quarter of FY24.

RBI has received more than a dozen applications for SFB licenses. However, many have faced rejection or are still in the process.

Earlier, in October 2021, the Reserve Bank of India issued a Small Finance Bank (SFB) license to the consortium of Centrum Financial Services Limited and Bharatpe’s parent Resilient Innovations.

In July 2023, three applications by Akhil Kumar Gupta, Cosmea Financial Holdings Pvt Ltd, and West End Housing Finance Ltd were rejected. Other payments banks, including Paytm Payments Bank and Jio Payments Bank, have also been vying for an SFB license.

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