Jaipur-based AU Small Finance Bank has worked out a diversification plan to expand in eastern and southern India and step up customer acquisition through a slab-based interest rate structure on savings accounts ranging between 4 per cent and 7 per cent.

The expansion will take the network of branches and touch points to around 750 by the first quarter of 2021-22 from 697 at the end of September 2020.

The bank began operations in the east through its first branch in Calcutta and plans to add another branch at Bhubaneswar soon.

“The first three years after we became a bank from an NBFC, the focus was more on stabilising operations. So, we were not looking to expand in markets where we were not present in the east and south. But we have expanded in Bangalore and more recently in Calcutta. Our immediate plan is to be present in all the state capitals and that should happen by the first quarter of next fiscal,” said Rishi Dhariwal, group head, branch banking, AU Small Finance Bank.

“We will have 725-750 touchpoints by the end of the first quarter of next year,” he said.

The bank is relying on its relatively high interest rates to shore up customer base in a competitive market. There is currently a slab based interest rate for savings account holders of the bank with a 7 per cent interest rate on incremental balance above Rs 10 lakh.

“The peak rate for savings account of our bank is 7 per cent and we are offering monthly interest on savings account, The cost to the bank is slightly higher, but given the segment that we cater to, we are able to manage the incremental cost,” said Dhariwal.

With declining interest rates, sustaining high rates on the liability side become a challenge. But Dhariwal said a combination of size of business and the segment of customers allows the bank to maintain a high interest rate.