Serving The Under-Served In Tourism - B M Gupta, CGM, Tourism Finance Corporation of India

While in its initial phase of entering the banking sector Tourism Finance Corporation of India will cater only to the SMEs in the tourism sector, the broader vision is that of spreading the business to achieve a larger share of financial inclusion, says the company’s CGM, B M Gupta, in this interview

What kind of opportunities do you foresee going ahead in the Indian banking sector with the existing players’ already experiencing stiff competition?

Being in the tourism financing sector, TFCI has the advantage of having created a niche segment for itself with the experience of funding both small and large projects. We have now applied for the banking sector as we believe that there is an opportunity in the SME market, specifically in the tourism sector. Again, it is largely under-served or rather un-served strata where the banks usually shy off lending. To be very specific we have got many district headquarters where a large number of SMEs are still deprived of funding as banks typically avoid backing these projects. For us though, it will be different since we are already familiar with the workings of the SMEs in this sector. 

Which geographies are you looking at for opportunities? 

We are already present in tier II and III cities and would now be looking for growth in tier III and IV cities. In the tourism sector we have already funded 600 projects till date. There are various other linkages to enter new geographies. Our focus on new areas is based on the fact that there are many who are still deprived of finance in such pockets.

Are you going to use your current infrastructure or will you be creating new infrastructure for banking? 

Though we are a two decade old, we do not have an extensive infrastructure, the reason being that it is not necessary. Hence there is no scope for using our current infrastructure for the banking initiative. It would have to be created anew.

TFCI has been able to sustain its spread over time. Do you feel that with expansion this will continue to be sustained? 

As regards the spread of our business, the higher spread stems from the fact that the business activity we fund is considered as high-risk. So we are expected to sustain the spreads we have been maintaining. Yes, it is possible that when more players arrive or we start lending to other segments, the spread may get reduced. 

What about the asset quality and its management? 

We have zero net NPAs despite the kind of growth in advances we have achieved in the past. This reflects the quality of our assets and our understanding about our business and customers. The best part is that we have been able to maintain such asset quality despite lending to high-risk clientele i.e. SMEs. The important factor is that we understand our customers and their payment capacities as there is a direct connect between us. Going ahead we feel we would be able to replicate the same model in our banking business.

Are you adequately funded to be eligible for banking requirements? 

We already have strong net worth created by us thanks to our strong past performance, which implies that we are well capitialised. That apart, we also have strong support from parent companies like IFCI, SBI, and other promoters. Therefore, funding will not be a major issue. Further, we have been able to raise funds at competitive rates and would be able to do it going forward too.

Do you feel the new banking licenses would result in better financial inclusion? 

As I mentioned earlier, initially we are looking at the tourism sector SMEs as a specific growth area. So we cannot say that financial inclusion would happen from our side on an immediate basis. This is about the micro factors of TFCI and not the others. Only after having achieved critical mass can we think of increasing our focus area. Till then we cannot say we are actually and practically involved in financial inclusion which demands a broader perspective and a lot more time. However, we will be a part of financial inclusion in some way by serving the under-served business community in the tourism sector.