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In conversation with Rajan, General Manager MSME, Union Bank

Updated: Aug 06, 2019, 06.35 PM IST
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In conversation with Rajan, General Manager MSME, Union Bank

1. MSMEs are still underserved, what is the lending potential of banks in this sector?
There is an addressable credit gap of Rs. 36 Lac Crores in the country, more pre-announced in low income states and North Eastern Region.

2. How is Union Bank and other Banks planning to meet the financial requirements of MSMEs?
To start with, reaching out to the un-reached in the upcoming areas, low income states and North Eastern areas will help. We're also looking at maintaining lower TAT, considering MSME as retail for Micro and Small Borrowers, hassle-free credit and minimum TAT, uniform Credit underwriting process through centralization and effective utilization of guarantee schemes viz., CGTSME, Hybrid Collateral etc. Then there are TReDS, Cluster Finance Schemes, Fintech like psbloansin59minutes.com, and Government E Market (GEM) Place. Additionally, tie-ups / associating with manufacturing / industrial bodies, equipment dealers, commercial and vehicles dealers etc will be carried out.

3. An Assocham report said that there are major concerns among financial institutions on the existing lending turning out to be NPAs, as MSMEs do not get payments on time, which in turn hampers the repayment cycle. How is Union Bank tackling this?
We're enhancing Credit underwriting process through centralization which ensures uniformity in dispensation. Secondly, the Lending Automation Solution is being beefed up and we're working toward evolving of Loans Products under MSME with clearly defined norms and guidelines for KYC & Processing. Our bank also has branded products similar to retail products in MSME also targeting the Micro & Small Sectors. Early Warning and Early Alert system is introduced to detect the sickness at the incipient stage. And lastly, rectification and restructuring measures as per RBI norms to address the issues at an early stage have been put in place.

4. On average, how much time does it take for an MSME to avail credit from a Bank?
The turnaround time for disposal of MSME application depends generally on the quantum of finance sought. Approximately, it takes 2-3 weeks for an MSME to avail credit from a Bank. However, due to centralization / Lending Automation, the time to dispose the application has come down in our Bank.

5. Have Basel norms adversely affected Banks' Lending to the MSME Sector?
I wouldn't say so. The Basel III norms have impacted to the extent of additional capital requirements for new funding to MSMEs, but not adversely.

6. What are the various sub-sectors in SMEs that Union Bank is targeting?
Apart from targeting the good performing MSMEs, Union Bank is targeting sub-sectors like financing commercial vehicles, financing bills under TReDS, financing small traders under Mudra with greater penetration, Mid-Sized SME ticket advances with limits from Rs. 50 Crores to Rs. 150 Crores, various cluster specific schemes. We are targeting health care / construction equipment sector, auto ancillary, consumer durables ancillaries etc as promising avenues.

7. Are Banks facing increasing competition from alternate SME lenders like online peer-to-peer firms?
That's correct. The increasing competition in lending to MSMEs is witnessed by the Banks in the areas of commercial vehicle segment, equipment finance segment, inventory funding, factoring services etc.


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