Cholamandalam hopes to be able to help customers transition from cash to digital payments
By Sajan C Kumar
Having bagged a licence for a payments bank Chennai-based Cholamandalam Investment and Finance company (Chola) is busy scouting for a partner. “We’re looking for either a bank or a technology player,” says Vellayan Subbiah, managing director, Cholamandalam Investment and Finance Company.
The financial services arm of the Rs 24,300 crore-Murugappa Group is among the eleven players to have received a licence from the Reserve Bank of India (RBI).
At the headquarters of the Murugappa Group in the iconic Parry’s Corner in Chennai, a team is busy with the blueprint given that the banks must be up and running in 18 months. Subbiah confirms the firm is keen on developing partnerships. “Some would be technology partners, some would be customer-acquisition partners and potential banking partners as well. From a technology perspective, I don’t think we would be developing the entire technology because both for the front end and back end, there is technology available,” he says.
Cholamandalam believes a partner can be useful in several ways. For instance, Subbiah points out that for a payments bank, there is a cap on accepting deposits from customers. “As a payments bank, we can’t accept more than R1 lakh of deposits from a customer. In case a customer exceeds that we may have to sweep that amount to some other account, for which we would need partnerships with banks”, Subbiah explains.
Not surprisingly, he is keen to get the bank off the ground. “I think it is very exciting. It is the first time such banks are being set up in the country. In an age where there is so much disruption in technology it is good that the RBI is actually encouraging us to cash in on the disruption to help further financial inclusion.”
Although he isn’t committing to a timeline, Subbiah believes there is a huge opportunity in providing payments and CASA services to a large chunk of the emerging and aspiring segment which was not using electronic transactions so far. “I would say, in that segment a large majority are already our customers and we have easy access to them for the purpose of financial inclusion,” he observes.
Given that the Cholamandalam group operates from over 579 branches across India with assets under management worth more than Rs 25,000 crore, it has a readymade customer base.
According to him, Chola’s captive base of over 7.5 lakh customers is waiting to be tapped. “The larger Murugappa group eco-system offers an even larger base of rural customers and this is a definite plus for us. We will take a solution to the market which will use both technology and our physical footprint. This will help digitise cash transactions and provide additional services to existing and new customers of the payments bank. Our focus will predominantly be on financial inclusion and on the MSME sector,” he said.
Cholamandalam hopes to be able to assist customers make the transition from physical to digital transactions. “Almost 80% of the transactions today are cash transactions and terribly inefficient in the way they are conducted. So, what we would like to do is to move these predominantly cash transactions to the digital domain. Often these customers are not tech savvy and therefore we have to assist them in the transformation process,” he explains.
The vehicle finance vertical can come in handy, believes Subbiah. “The vehicle financing scene is good, though as our focus is on building asset quality, we are taking a cautious approach,” the managing director observes. Indeed, the Cholamandalam team seems to have it all worked out.
