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Increasing the bouquet of digital products for MSMEs

Chandra Mohan Minocha, CGM, MSMEs & Small Corporate Vertical, Union Bank of India, explains the strategies to increase the business in the targeted segments:

Increasing the bouquet of digital products for MSMEs

Union Bank of India has always been a forerunner in implementing technology-based digital products. It is the first bank to extend Shishu Mudra STP (straight through processing) to sanction business loans up to Rs 50,000 with end-to-end digitization up to the disbursement stage. Also, it is the first bank in the industry to issue MSME credit card, digital delivery of working capital finance to MSMEs through credit cards. Bank has also enabled auto-renewal of MSME loans up to Rs1 million, improving customer service with reduced TAT.

During the current FY under MSME front, the bank will scale up the existing Shishu Mudra STP to Kishore & Tarun categories with loan amount up to Rs1 million. Chandra Mohan Minocha, CGM, MSMEs & Small Corporate Vertical, Union Bank of India, informs: “Our bank is working towards strengthening of digital ecosystem having smooth and hassle-free digital journey with superior customer experience. Also, work is under process to increase the bouquet of our digital products by digitizing MSME products viz, equipment finance, GST Gain (scheme to extend working capital finance to GST registered MSMEs), etc.”

Attractive Products

MSME is one of the important sectors of Indian economy and is also a focussed area of Union Bank of India as part of RAM (retail, agriculture & MSME) credit. MSME contributes about 30% of its GDP, provides employment to more than 100 million and aids in women empowerment and for effective utilization of WAP (working age population).

Union Bank aims to become the bank of first choice for MSMEs and is committed for supporting the sector through increased flow of credit. It has formulated various schemes/products to extend need-based credit facilities to MSMEs across all the segments i.e., micro, small and medium. For the current FY, the bank has identified 3 niche products for increased lending and to achieve market leadership in financing to these segments. The bank has products for women, equipments and healthcare infrastructure.

The bank’s Nari Shakti scheme is to assist the women entrepreneurs to scale greater heights. Its scheme for equipment finance is to have an active role in the infrastructure development of the country. Ayushman Plus product is aimed at improving the healthcare infrastructure.

Minocha points out: “Union Bank of India has formulated an exclusive scheme for financing women entrepreneurs’ business requirements with credit facilities up to Rs100 million. We have customized special product for extending equipment finance up to Rs500 million to both MSMEs & non MSMEs at concessional rates and liberalized terms. We are also entering into tie ups with reputed OEMs to extend need-based equipment finance to their customers. The bank has designed a special product for financing the medical professionals for establishment, expansion, modernization of hospitals/clinics/nursing homes including diagnostic centres & pathology labs with limit up to Rs1 billion.”

Growth Prospect, Strategies

Union Bank of India has registered y/y growth of 11% in the overall MSME portfolio and 10% y/y growth in micro & small portfolio as on 30 June 2022. Few of its strategies/initiatives have increased lending to MSME sector. Every Friday is being observed for government sponsored schemes. The bank is conducting Customer Day on every first and third Saturdays of the month. The bank has increased tie-ups with NBFCs for co-lending to MSMEs.

With the growth in Indian economy and overall industrial output and considering the ensuing festive season, the bank expects demand to pick up resulting in increased credit demand. In the current FY, UBI envisage to register y/y growth of about 15% under MSME portfolio. The recent data of RBI evidencing bank credit growth 15.5% supports this.

Minocha elaborates: “We have launched Union MSME First Branches (UMFBs) to serve MSME clientele, exclusively aimed at customer excellence. We have also launched Union Start Up branch at Koramangla, Bengaluru to support start-up units. Digitization of credit products are believed to have improved customer experience with reduced TAT. Focussed approach on clusters with 30+ cluster specific products for financing units operating in the identified clusters operating across the country is also contributing.”

Stress To Reduce Further

NPAs under MSME portfolio the bank has reduced by more than 3.5% y/y as on 30 June 2022. Minocha estimates: “Considering the economic recovery and improvement being observed in the cash flows of business units post pandemic, we expect the stress under MEME portfolio to reduce further.”


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