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Unity Small Finance Bank will focus on low ticket size transaction credit: BharatPe’s Ashneer Grover

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Unity Small Finance Bank will focus on low ticket size transaction credit: BharatPe’s Ashneer Grover

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In this episode  of ‘Young Turks’ the spotlight is on the 3-year-old fintech startup BharatPe that has partnered with the over 40-year-old NBFC Centrum Finance to break into India's banking ecosystem. Shereen Bhan spoke to Ashneer Grover, co-Founder & MD, BharatPe to discuss the road ahead at BharatPe.

The Reserve Bank of India last week granted a small finance bank (SFB) license to the Unity Small Finance Bank (USFBL), an equal joint venture between Centrum Financial Services and BharatPe.

A new bank license has been issued after a gap of nearly six years. With the establishment of this new small finance bank, the number of SFBs in the country goes up to 12.
Unity Small Finance Bank will now take over the assets and liabilities of the troubled Punjab and Maharashtra Cooperative Bank providing relief to depositors.
In this episode of ‘Young Turks,’ the spotlight is on the 3-year-old fintech startup BharatPe that has partnered with the over 40 years old NBFC Centrum Finance to break into India's banking ecosystem. CNBC-TV18’s Shereen Bhan spoke to Ashneer Grover, co-founder and MD, BharatPe to discuss the firm’s road ahead.
Talking about the regulatory process, Grover the first step was to get the bank up and running, because, in the process of taking over PMC bank, a bank was needed first. 
“What we have done is made the bank operational in record time. Never before has a bank been made operational within four months of getting in-principle approval,” he said. USFBL is now waiting for the scheme to get ratified, through which it will eventually take over PMC bank.
When asked about the strategy Grover said most banks in India, at one point in time, operated manual ledgers. In fact, the core banking system is something they put into place into a running bank, and USFBL, on the other side, has got a license in a day and age where everything is on the cloud, he said. 
He explained there even physical servers are not needed because the primary mode of engagement for the consumer is now the mobile phone and the app. USFBL intends to be digital-first for the customer to start with. 
“Right from onboarding, interacting with the bank, customer support, everything will be built out digitally, first. A lot of people call themselves digital banks or new age banks, but a lot of people don't have their own licenses. So it is a big opportunity and responsibility for us as well. But we have been given the first license in this case, and we hope to come out with really differentiated products on the back of it,” he said.
He added that USFBL wants to go after low ticket size transaction credit, both on the consumer side and on the merchant side. The real big market in India is actually the low ticket size notes, which can only be profitably underwritten using technology, Grover explained. 
The bank is going to be more retail and it will target small and medium enterprises on one end and consumers on the other end, he said, adding that it will not go big on corporate banking or service the large business houses.
Grover also commented on On 'Buy Now Pay Later' (BNPL) saying it is a space that is wide open in India.  “BNPL is a fancy term, it stands for buy now pay later, but it is nothing but a credit card on a mobile device. It is as simple as that. We are just underwriting an individual. The individual can spend the credit limit assigned to him either on a QR code, which right now is BharatPe a QR code. Tomorrow, if the market opens up we could make it even wider. Or you could spend that money using a card that we give to you. It is both a physical card and a digital card,” he explained.
Grover ruled out actively looking for mergers and acquisitions. He said he started his career as an M&A professional and has seen M&A activity fail many times. “Payback India integration is actually going ahead really well. We have launched Postepay product on the back of that integration, and we want to focus and make it a success first. The other acquisition, of course, which we are doing is the PMC Bank. So I think we have got our hands full, I just don't want to do too much all of a sudden,” he said.
For the full interview, watch the accompanying video...
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