Fino Payments Bank is on track to meet RBI conditions for its conversion into a small finance bank, emphasising secured loans and strategic operational preparations ahead of its planned completion by 2027.
Fino Payments Bank said it remains on course to meet Reserve Bank of India conditions for its conversion into a small finance bank, with management expecting the required milestones to be completed within the 18-month window and an operational readiness filing due by the end of fiscal 2027. The transition would mark a major shift for the lender, which received in-principle approval from the RBI in December 2025, according to Livemint, after becoming the first payments bank to secure permission to move into the small finance bank category.
At an earnings call, interim chief executive Ketan Merchant said the group is building a lending model centred on secured loans, with an initial portfolio target of roughly 90% secured assets and an average yield of about 14%. Interim chief financial officer Anup Agarwal said Fino’s unusually low cost of funds, currently around 1.4%, could support net interest margins of 8% to 9%, which would place it among the strongest in the sector. Management said that spread could give the bank an advantage of about 300 basis points over peers.
The company is already putting the transition framework in place. It has appointed PricewaterhouseCoopers to work on operational readiness and brought in technology partners for loan origination and loan management systems. Agarwal said senior hires are expected between September and October, while the end-to-end customer loan journey should be ready by February 2027. The bank expects to submit its readiness application to the RBI by the end of the fourth quarter of fiscal 2027.
The strategic shift also appears to be reshaping Fino’s lending mix. Agarwal said referral loan disbursements jumped 214% from a year earlier to ₹628 crore in the first quarter of fiscal 2027, amounting to nearly half of all disbursements in fiscal 2026. He added that there are no non-compete restrictions with partner non-bank lenders, meaning the bank should be able to target those customers directly once it becomes an SFB. Livemint has previously reported that Fino plans to focus on secured products such as loans against property, affordable housing finance and gold loans, while reducing its reliance on unsecured credit.
Management also addressed the operational and balance-sheet implications of the conversion. Merchant said more than 90% of the liability book is stable core savings deposits, and pointed to a March stress period in which the balance sheet still grew by about 9%. Agarwal said Fino intends to keep a conservative loan-to-deposit ratio of around 70% and a current account and savings account ratio near 65%. The company expects an additional P&L hit of about ₹10 crore this year from transition-related spending, mainly hiring and operational build-out, but said most of the technology investment has already been made through the move to the Finacle core banking platform.
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