Mumbai: The IIFL group has made a strong pitch for letting brokerages enter the banking fray, saying its success with 4,000-odd branches gives it the necessary bandwidth to replicate the same in commercial banking.
"I am confident that we at the IIFL, with our over a decade of experience and a nationwide footprint, can replicate the success we have had in the financial services space, in the banking arena, too, if the RBI allows us to enter the space.
"I am confident each of our over 4,000 branches spanning 900 locations can be converted into a bank," IIFL group Chairman Nirmal Jain said.
The city-based brokerage and NBFC player is keen on applying for banking licence as soon as the Reserve Bank invites applications, which may happen early next fiscal. The regulator is set to issue the final guidelines on new set of private banks anytime from now.
To a query on what will be his focus area--large cities or rural areas--if given allowed to set up bank, Jain said the latter (non-metros), as opportunities are much more in semi-urban and rural markets.
"My focus will not be the metros or the large cities, which are over-crowded. I am very confident that I can do an encore of my NBFC and brokerage success in commercial banking too by focusing on the non-metro markets," Jain said.
Whether the group has enough financial muscles to run a bank and also could meet the strict entry norms, Jain answered in the affirmative.
"None of my business verticals is making losses, including the broking arm, which is witnessing an erosion of margin due to market volatility and poor volume. Since we are not an over-leveraged company, we can easily raise more than enough funds."
Arguing that execution is the key for success in any field, including banking, Jain said, "If with 1-2 bps margin, down from 100-120 bps a few years ago, brokerages are making money today, better technology and innovation can help run a successful bank at half the cost which is being charged today."
The group offers advice and execution platforms for financial services including equities and derivatives, commodities, wealth and asset management, insurance and mutual fund distribution, fixed deposits, retail loans, i-banking, and government securities, among others.
The December quarter saw the group reporting highest ever quarterly profit of Rs 75 crore, a growth of 106 percent. This was the sixth time that the company has been consistently reporting profit growth, Jain said, adding income grew 45 percent to Rs 696 crore.
Jain said his private wealth management business under the label of IIFL Wealth has crossed Rs 36,000 crore in assets under advice early this month, making it one of the largest in the segment.
During the December quarter, his investment banking arm has closed the largest qualified foreign investor deal in the country worth USD 110 million, while its mutual fund arm grossed up about Rs 12,000 crore, a growth of over 90 percent from previous fiscal.
During the quarter its credit business grew to Rs 8,936 crore from Rs 7,849 crore a year ago, primarily driven by retail loan growth (91 percent) and its net bad asset ratio is just 0.25 percent.
The group is also into insurance and mutual fund distribution, both of which showed healthy growth. Broking and related income grew to Rs 143.5 crore, while financing and investing income rose to Rs 469.5 crore, and marketing and distribution income to Rs 80.6 crore.
In the second quarter the group had boosted its capital adequacy by raising Rs 500 crore through a public issue of sub-ordinated bonds.