Insurance firms, banks rush to invest in small finance banks

In most of the planned SFBs, insurance firms have picked up stakes with banks and mutual funds, too, showing interest in SFBs.

The big reason behind it is financial institutions are betting on and the potential synergy in distributing financial products in the rural and semi-urban markets, say experts.

At Ujjivan, which got listed on stock exchanges a few months ago, insurance companies hold 9.75% stake as on September 30, 2016. Insurance companies which picked up stake include HDFC Standard Life Insurance, Bajaj Allianz Life Insurance, Birla Sun Life Insurance, Max Life Insurance and Shriram Life Insurance.

“From a strategic point of view, collaboration with banks and insurance companies will be useful in the long term. Majority of our loans, around 50% of our portfolio, has to be less than Rs 25 lakh. For the remaining portfolio, we may not like to write the portfolio in our books. So, bank can be a sourcing partner. As we start, we’ll think of other ways of collaborating,” said R Baskar Babu, Chief Executive of Suryoday Micro Finance.