Why UAE Exchange wants a banking licence in India

The remittance and foreign exchange company UAE Exchange on Monday announced plans to try to secure a bank licence in India. It will compete with the likes of Tata Sons and Reliance Capital to secure one of just a handful of new licences that India’s central bank will issue for the first time in more than a decade. BR Shetty, the managing director and chief executive of UAE Exchange, talks about why the company is so keen on setting up banking services in India.

Why did you decide to apply for a banking licence in India?

After being an active player for so long in money transfer, getting into banking is a natural progression. India is one of the strongest markets for us. It is the largest receiver of remittances in the world and we contribute 10 per cent of the remittance flow to India. We have been very closely associated with Indian expatriate community for a long time now and they form a significant percentage of our customer base. Hence this move to bring them banking services seemed appropriate by all means.

There are already a lot of banks in India, so why do you believe there is room for more?

It’s true that there are many players in the market. But India is a mighty market with a huge section of its population remaining financially excluded. As per the census survey in 2011, the overall percentage of households availing banking services in India stood at around 59 per cent as of 2011, which means that over 40 per cent of total households lack access to formal banking services. This is largely driven by rural areas and the low income group population, due to their financial illiteracy, low level of income and savings, lack of collateral and absence of verifiable credit history. The government is taking measures to include the un-banked population into the financial mainstream. We see this challenge of financial inclusion as an opportunity. We, as a leading global remittance brand, have been dealing with a huge population which belongs to the bottom of the economic pyramid. Most of them still go without a bank account. The meagre amount, which they send from another country doesn’t suffice to fulfil the requirements of the family – then how will they be able to save. Since we understand both sides of the problem, if we get to do banking in India, we would be able to provide many innovative solutions that address the target customers’ requirements perfectly.

How will your business change in India if you secure the licence?

Currently we are offering remittance, foreign exchange, bill payments, loans against jewellery, in India. With the banking licence in place, we will be able to offer all the other services which a bank provides. We already have a strong market presence in 20 states in India and we are well equipped to expand, once the bank licence is through. We have identified financial inclusion as a business vertical. This is a straight fit business case for us as the majority of our customers are the ones who send home small tickets in the range of Rs15,000 to Rs20,000. We have already worked with them by introducing them to the formal financial system and we will be glad if we can help them by creating a culture of savings and investments. The RBI (Reserve Bank of India) guidelines stipulate minimum capital requirement of Rs500 crore to start with and we have planned much above this in our licence application submission to RBI.

It seems that there’s quite a lot of competition for the licences. Are you confident that you will get one?

Competition is what keeps the business realm healthy, so that doesn’t worry us. With our strengths in infrastructure, technology, branch network, subject expertise, customer trust and our long association with money transfer business, we are a strong contender.