'MFIs are yet to recover from demonetisation impact'

'MFIs are yet to recover from demonetisation impact'

In conversation: Ittira Davis, COO and Head of Transition, Ujjivan Small Finance Bank

'MFIs are yet to recover from demonetisation impact'
One of the leading microfinance companies, Ujjivan Financial Services, in February this year, announced its transformation into a small finance bank. Ujjivan Small Finance Bank (Ujjivan SFB) has been gradually converting all its microfinance branches into bank branches. As branches go live, so are customers being converted into bank customers and are receiving full banking facilities offered by the SFB.

In an interaction with DH’s Uma Kannan, Ujjivan SFB Chief Operating Officer and Head of Transition Ittira Davis spoke about the bank’s future plan and how it uses both technology and human interface in a better way to serve customers.

Edited excerpts:

How many microfinance branches have been converted into bank branches till now, and how challenging it is to operate in the banking space?

It’s been a good run so far. We are converting branches gradually. Right now, we have 42 bank branches. As per the RBI, we have to complete converting all branches into bank branches by the end of three years. At present, there are 15 bank branches in Karnataka alone, of which 12 are in Bengaluru, and the rest are in Ramanagara.

Also, in Ramanagara, we have our first unbanked rural centre, which is receiving a good response. We have five lakh customers in Karnataka alone, and there are 35 lakh customers across the country. By the end of this financial year, we are planning to have 162 bank branches.

Can you elaborate more on unbanked rural centres ?
As a small finance bank, 25% of our branches should be in unbanked rural centres. We have identified certain locations and we will be opening 30 to 40 branches in these unbanked rural areas. So, out of our total 460 branches, close to 125 will be in these areas at the end of three years.

Apart from your existing microfinance customers, how are you attracting other customers to open a bank account in your SFB?
In order to acquire new customers, we have to offer them something different, as most of them will be customers of other banks.

 Also, we want to differentiate ourselves from others. Our open market team’s job is to onboard new customers. What we offer now to customers is ease of opening an account.

Within 15 to 20 minutes using our handheld devices, one can open an account without any paperwork. Our interest rate for a one-year range is 8%, which is quite attractive, as most other nationalised banks offer customers only between 6.5% and 7.5% rates.

Whatever cost we have saved, we are passing it onto customers. Also, we are continuing our early offerings such as personal loan, education, and housing loans. We are also looking at the MSME sector, as that’s the area we will be growing.

Have MFIs fully recovered from demonetisation impact?
No, it will take a long time. Six months have passed, and recently, State Bank of India has said that demonetisation has and may continue to result in a slowing down of the Indian economy, which may adversely affect the bank’s business.

No bank can say that they are not affected, everybody is affected but the degree varies. In the case of microfinance institutions, they deal a lot more with the people and they are a bit more affected than large organisations. This is especially felt in repayment of loans and each one of us is working and talking to customers, by educating them in the process. From 99% repayment, it has come down to 95%, and now it’s slowly moving back. Ours is slightly better compared with the rest. The whole process will take a full year, and still, we have a few months left.

How well are you using technology since all banks are now adopting the same in a big way? What’s your game plan for coming years?
We will be using technology with a human element attached to it. We will be using the combination of technology and human interface. Also, we focus on customer service quality and response, and we are making quite a difference in that space compared to others.

Each of our branches has got ATMs and one of the features that we offer is the use of biometric. Instead of PIN, one has to place the thumb.

Everybody can provide various services and technology, we are looking at customer service, and how well we can do the same.

We are still a community bank, and our focus is on the community that we have established. We are trying to play a role in that community.

Have you recruited more people while transforming yourself into SFB?
All our existing staff has now become banking staff. We were 8,500 before, and now we are 10,000 strong workforce, and we have recruited people with banking experience.