Unity Small Finance Bank, which missed the opportunity to acquire Aviom India Housing Finance, is focusing on exploring future prospects instead of rushing into any acquisitions, according to Jaspal Bindra, executive chairman of Centrum Group, in an interview with Atmadip Ray. Bindra also serves as a non-executive non-independent director at Unity Bank, which is predominantly owned by Centrum Group (51%). The bank plans to venture into the housing finance sector in the latter half of the year. Edited excerpts from the discussion follow:
1. Following Centrum’s housing portfolio sale, it was anticipated that Unity would enter the housing finance market. The bid for Aviom Housing was viewed as part of this strategy. Do you regret not winning that bid?
Housing represents a significant asset class, and we aim to engage in it in some capacity. We previously sold Centrum Housing Finance, which focused on affordable housing. Whether we will pursue affordable housing again, micro-loans against property (micro-LAP), or another related avenue remains to be seen. However, engaging in the housing asset class is essential for us.
Unity Bank aimed to strengthen its foothold in the micro home loans sector with its bid for Aviom. The bank approached the bid with a clear strategic intent, which unfortunately did not materialize. The board and management believe it is wiser to keep options open for future prospects rather than chase an acquisition at any cost.
2. What is the current status of Unity’s entry into housing finance?
The housing sale is still pending completion. As such, we cannot officially commence operations related to housing finance until it concludes. Although we have sold the business, we still operate it as we can’t bring it to a halt. Therefore, we are currently unable to launch related initiatives within the bank.
We’re conducting substantial internal preparations and expect the housing sale to finalize by April or May. Our strategy for the housing sector focuses on avoiding prime lending in metropolitan areas; we are more interested in affordable housing. We will also explore opportunities with micro-LAP loans which generally fall within the ₹2–5 lakh range.
3. Are there plans for a public listing?
We are a couple of years away from a potential listing. The regulations regarding listings for small finance banks have changed; previously, the RBI mandated a five-year operational period before a listing, which has now been extended to eight years. We expect to start considering our listing timeline in two to two-and-a-half years.
4. How is Unity Bank positioned in terms of capital?
Fortunately, Unity Bank is well-capitalized, currently maintaining a capital adequacy ratio of around 28%. This is not an immediate concern, but we will require additional capital as we grow.
5. Might you utilize excess capital for growth in other asset classes?
It’s premature to consider that. We are currently focused on organic growth and do not yet have the scale for inorganic expansions. We will evaluate this in the coming years.
6. What would be the ideal business composition for Unity on the asset side?
Housing remains a priority for us, but it will take time. The MSME segment is crucial, along with supply chain financing and some commercial banking activities. Recently, in late 2025, we launched two new digital products—two credit cards and a personal loan—and initiated a gold financing business through a digital platform.
7. Unity has a significant microfinance sector… currently, microfinance makes up about 25% of your loan assets. Given its volatility, what is your strategy moving forward?
We are content with microfinance comprising around 20% of our portfolio. While it’s currently 25%, as other sectors grow, its share will decrease. Microfinance remains a viable business, though cycles of market fluctuations are expected every four to five years. It can be profitable if managed conservatively during prosperous periods.
8. How do you perceive the evolution of the small finance banking sector? Why are there limited new license applicants?
Historically, this sector has been perceived as risky due to past challenges in profitability. This reflects a traditional mindset; small finance banks (SFBs), however, have shown resilience and potential for growth. The limited new applicants for licenses often feel overwhelmed by compliance obligations, while others may lack confidence in meeting the regulatory standards.
9. Indian regulators hesitate to allow corporate ownership of banks due to potential conflicts of interest. Based on your global observations, what is your stance on corporate ownership in banking?
Globally, including in countries like Korea and Singapore, many local banks are owned by domestic corporations, with strict regulations to ensure impartial operations among group companies. These rules can certainly be established, but enforcing them remains a challenge. Historically, family-owned banks had a significant presence in India, and it is the RBI’s prerogative to decide when to allow corporate ownership once again.
10. How do you envision the future of the Indian banking sector?
The current Indian banking landscape reveals two trends: a relative lack of banks compared to our population and economy size, and a scarcity of large banking conglomerates. While major players like State Bank of India and HDFC exist, this economy could support larger banks. Government consolidation efforts may lead to larger institutions, but private sector banks are also poised for significant growth.
A limited number of banking licenses and a lack of interest from eligible entities hinder the establishment of new banks. Until regulatory barriers impact corporate entry, the problem will persist. The landscape is evolving, especially with newer foreign banks from Asia and the Middle East emerging, investing significantly in existing entities rather than entering the market with new banks.
More banks and larger institutions will drive evolution in the sector. If the government continues to encourage foreign investment in existing banks, this trend will further enhance the landscape.
