"We are catering to lower middleclass and the bottom of the pyramid where the banking service is yet to be reached. This could be a good opportunity as far as the business is concerned," VP Nandakumar, MD & CEO, Manappuram Finance said.
This banking correspondence model is a fee based activity, so that will not help us in our credit growth.
VP Nandakumar
CMD
Manappuram General Finance
In an interview to CNBC-TV18 VP Nandakumar, MD & CEO, Manappuram Finance shared his views on the central bank's decision to allow NBFCs to act as business correspondents (BCs) or agents of banks.
Welcoming the move, Nandakumar said that Reserve Bank of India's regulation will have a positive impact on the company. However, the company is yet to quantify financial impact/benefit of RBI's norms.
On Tuesday, RBI said there should be a contractual arrangement between a bank and an NBFC-ND to ensure that possible conflicts of interest are taken care of.
Nandakumar doesn't see conflict of interest in implementation of new norms.
Also Read: RBI NBFC norms will enhance financial inclusion, says Shriram
Below is the transcript of VP Nandakumar's interview with Sonia Shenoy & Anuj Singhal on CNBC-TV18.
Sonia: A non-deposit taking non banking financial company (NBFC) like yours, how much of an impact could this news flow have?
A: It will have a positive impact because we have nationwide presence with around 3,000 plus branches. We are catering to lower middleclass and the bottom of the pyramid where the banking service is yet to be reached. This could be a good opportunity as far as the business is concerned. So, I feel it's a good opportunity for the company.
Sonia: Can you quantify it for us. I know it is too early to do that but in terms of credit growth or credit disbursal how much could it help you?
A: This banking correspondence model is a fee based activity, so that will not help us in our credit growth.
Sonia: What kind of impact would it have on your earnings in the next one year or so?
A: That has to be quantified. It has come yesterday. We have to quantify and get back on that.
Anuj: Any ballpark number that you can give us because the market is quite excited about what has happened?
A: I cannot do that because it has to be quantified and unless it is quantified correctly I will not be able to give you the figure.
Sonia: Will there be any kind of conflict of interest between the bank and the NBFCs and in order to avoid that what is the mandate that the RBI has put forth?
A: In our case there will not be any conflict because essentially we are a gold loan company. Here the products that we are going to handle maybe other products than gold loan. Therefore, I do not think there will be a conflict of interest in implementing.
Sonia: Eventually will it bring down transaction cost for an NBFC like yours?
A: No. For the bank the transaction cost will be brought down because they can do business in a branchless mode – that will save lot of it.
Sonia: So Manappuram Finance will take part in this programme?
A: We are interested and we were looking for this opportunity for a long time.
Manappuram Fin stock price
On June 25, 2014, at 11:05 hrs Manappuram Finance was quoting at Rs 23.95, up Rs 0.65, or 2.79 percent. The 52-week high of the share was Rs 25.65 and the 52-week low was Rs 9.85.
The company's trailing 12-month (TTM) EPS was at Rs 2.69 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 8.9. The latest book value of the company is Rs 31.73 per share. At current value, the price-to-book value of the company is 0.75.
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