As Fino becomes small finance bank, the focus shifts to secured lending

Subscribe to enjoy similar stories. Fino Payments Bank, the first payments bank to receive an in-principle nod from the Reserve Bank of India (RBI) to transition into a small finance bank (SFB), is gearing up for a strategic shift that will expand its current business model significantly. The transition will be a cautious one with a focus on secured lending, primarily loans against property (LAP), affordable housing, and, to some extent, gold loans, managing director and chief executive officer Rishi Gupta told Mint in an interview.

Unsecured lending will be strictly limited and targeted, he added. Following the RBI's approval on Friday, the bank will look at a higher proportion of secured assets as compared to unsecured assets, adding that it is not very keen to work on the microfinance institutions' lending space. Beyond new products and portfolios, Gupta sees the SFB approval as a broader validation of Fino’s model and long-term viability: it gives employees stability, opens credit access for merchants, offers investors a differentiated SFB rooted in payments, and expands the range of services for customers.

Even within unsecured lending, Fino Payments Bank plans to restrict itself to small business loans for its long-existing merchants, typically in the ₹5-10 lakh range. Gupta said he wants to focus on calibrated growth rather than reckless lending. “We have a big network of merchants and customers which will be our first set of people to go to…We understand our merchants well, with their income, their deposits, their transaction flow.

That will be our focus area," he said. Fino’s merchant network grew to 2 million, with 56,000 merchants added in the quarter ended September. Average deposits rose 36% on year to