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CUB aims at Rs75 bn SME portfolio

Intro: Dr N. Kamakodi, MD & CEO, City Union Bank, speaks about the special measures initiated by the bank to augment the flow of credit to MSMEs and consumer durable goods sector:

City Union Bank has sanctioned credit to 1949 SMEs amounting to Rs548 croresin Q2, 2015-16. Most of these sanctions are likely to materialize during the third quarter. The outstanding as at September 2015 is Rs5035 crore, registering a yoy growth of more than 20%.

Says Dr N. Kamakodi, MD and CEO of the bank: “Our main focus has been on the SME sector over the years and we have continued this tradition. The sector contributes around 35% to the total credit of the bank.”

City Union Bank has extended around 300 loans for consumer durable goods amounting to Rs55 lakh in Q2 FY 2016. The portfolio size is minimal with a marginal yoy growth. As the bank predominantly has presence in the southern part of the country, branches in Chennai, Bangalore and Hyderabad and few branches in western region have contributed to the growth. The bank is very selective in expanding consumer durables loan segment and these types of loans are mainly based on the relationship with the customers, says Kamakodi. The main focus is on the SME segment.

There is no particular brand against which the bank extends loans in the consumer durables segment. “These types of loans are mainly based on the relationship with the customers. The bank has made interest rate reduction of 50 basis points to get more customers for consumer durable loans in the current year,” says Kamakodi.


The bankdelivers the tailor-made credit to its SME customers depending on their requirements. Small manufacturing units in textile, automobile and steel sector contributed to the highest amount of MSME credit from the bank, besides retail trade segment, informs Kamakodi.

The bank has specialized credit processing centers in different parts of the country. Kamakodi says the expertise and quickness of these operational units will facilitate quick turnaround time of sanction of credit facilities to customers. The bank also adopts cluster approach, wherein the credit sanctioning authority at corporate levels visits the customer’s place and the in principle sanctions are given in minimum time.


City Union Bank’s branches are predominantly in semi-urban and rural areas and the bank feels that the drive towards information technology needs to be stepped up by the SMEs. The bank is not using any social media to market its products for SME segment. “We are getting referrals from the existing customers and the same has been used as marketing platform to promote business under SME. We have extended online facility for SMEs, but the response is minimal. The prospective customers find it more convenient to discuss the credit requirements at the branches, as we do have substantial presence in the southern part of the country,” says Kamakodi.

The bank has a facility to make requests online and there is a racking mechanism of follow up for conversion of calls. There is software installed for log in, follow up till conversion / closure of calls. The eligibility criteria and EMI calculation charts are provided in the website. The credit proposal tracking software enables the customers to know the status of their credit application, says Kamakodi.


The biggest challenge for the Indian SME segment is to match the prices of the imported SME products, especially from China. The products are to be made import substitutable with better price, matching with the cost of production, which is slightly higher owing to non-availability of cheap infrastructure and power.Kamakodi suggests thatproduct innovations should be on a continuous basis to meet the competition from these countries.

The major challenge for the bank in consumer durable loans is the inability of the customers to provide income proof to jusify their repaying capacity. While there are good number of prospective clients approaching the bank, it has to solely rely on due diligence and party’s background. “We are educating consumers on these aspects and with the on line tax filing becoming easy, we do see much scope for improving in these aspects,” says Kamakodi.


The bank’s NPA levels with regard to the MSME sector is at a minimal level and the bank does not perceive any risk of increase in these levels. The bank has a good monitoring mechanism and by the continuous follow-up it can reduce the level of NPA. “We will continue our recovery efforts in maintaining the level of NPA at 0.5% of the total credit portfolio,” asserts Kamakodi.

The bank has been very selective in extending the consumer durable loans and with the present size of the portfolio, the instances of NPA is of very miniscule size. Kamakodi says: “The bank does not perceive any other risks in this segment, especially in their default rates.”


The bank plans to establish more credit processing centers in different parts of the country and proposes to establish regional office set-up in the coming years for facilitating quick credit sanction, dispensation and monitoring for SMEs. Further, visits to the clusters based on the geographical are expected to take the portfolio to the targeted levels.Kamakodi reveals: “The bank envisages a SME portfolio of Rs7500 crore as at March 2016 and the it will continue its special focus on this segment, constituting 35% of the bank’s loan book size.”

While the credit growth in consumer durables segment remains very low, Kamakodi says he does not intend to assign any target for this segment.

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