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Last updated: 03 Aug, 2018  

LVB.9.Thmb.jpg Last mile credit delivery to MSMEs improving: Lakshmi Vilas Bank official

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Rituparna Kakati | 03 Aug, 2018

In an exclusive e-mail interview with SME Times, Narayanan P P, President, MSME & Transaction Banking, Lakshmi Vilas Bank, said that last mile credit delivery to the Indian micro, small and medium enterprises (MSMEs) is gathering momentum in recent days.

Excerpts of the interview...

Please share your views on the recent development of Lakshmi Vilas Bank in Retail and MSME sector.
Narayanan P P:
LVB is a 91 year old bank and has its presence mostly in the South of India. South India has always been a favorable region for MSME space for all banks. The Bank has always tried to offer suitable solutions to its cohort of MSME customers. The last 2 years has been quite eventful for the business and the effects of demonetization, GST implementation and RERA had affected the customers as well as the Bank’s business. Nonetheless, the bank has endeavored to support its customers through various dispensation on account of policy changes as per the Regulator’s guidelines. Further, the subvention schemes that the Government has tried to devolve through the banking systems have also been adopted such as in Gold Loan schemes, etc. Also, in retail segment, though in its nascent stage, the Bank has focused on loan against property, mortgage and gold loans and this has held the bank in good stead.

Regarding industries, the Bank has been able to support MFI-NBFCs, Agro processing, Commercial Vehicles, Textile, Engineering and Manufacturing to name a few.

With the current developments, the Bank has also believes that it is necessary to service the customer through the entire life cycle, and hence it is but natural to offer BSBDA accounts, cash credit, term loans, LC, SODD, etc.

Also, for the last mile connectivity, the Bank has begun to establish business correspondents wherein the bank branches are not located and it is with strategic partnerships that we intend to achieve growth in other geographies in India.

What are the exclusive products you offer to the MSME sector?
Narayanan P P: As mentioned above, the Bank offers all types of Business credit, SODD, bill discounting and jewel loans. Today, the Bank believes in servicing the customer with a suite of offerings and that includes not only asset based products but also liabilities in terms of OD facility, loan against deposits, dynamic current flexi accounts and forex to name a few. Over time, the Bank envisages that the customers shall migrate to its digital platform and each customer can have a ready to attend chat bot enabled or customer service relationship manager who can service the customer with not only traditional but new products.

Digital technology has changed the present day banking scenario. What initiatives LVB has taken in this direction?
Narayanan P P: The journey of the Bank has been an interesting one. Just like other banks, LVB believes in an omni-channel strategy and anticipates that in near future, literally all basic transactions shall migrate into its digital platform. LVB current has around 30-40% of its transactions online. LVB is in the process of launching its latest core banking system of Oracle and along with the same, it is enabling the entire India stack. The Bank believes that in our offerings of investment solutions through app based services have been a good success and slowly but surely, this is becoming a major revenue earner and enabling sticky relationships for the bank

Our mobile banking facility is also up and the major challenge here is to integrate a seamless API based platform that shall offer huge economies of scope for the bank in terms of payments, merchant acquisitions, investment solutions, etc.

Further, the Bank is launching is suite of cards (prepaid, gift cards, credit cards against fixed deposits) that shall also enable the customer to transact effortlessly.

Can you please share your views on disbursal to the MSME sector by Indian banks?
Narayanan P P: It has been interesting in seeing the translational and transactional gearing in the economy post the effects of GST and demonetization. True to the IIP nos. as report by the industry, the Bank has also seen upsurge in the credit uptake in the MSME sector. Post the revised classification of MSME as per the regulator/government, the Bank believes it will also help in pricing issues. In today’s context, the SME customer requires service and that too with a razor sharp TAT. The Bank is in course of providing all the enablers in this financial year. Further, the Bank has looked to diversify its disbursals across various industries. Commercial Vehicles, Personal Gold Loan, Agri based gold loan, Loan against property and working capital loans have seen a major uptake. Last mile credit delivery through MUDRA loans and other loans to Micro and Small Industries is gathering momentum in the recent days. The ten new Small Finance Banks are also expected to play a major role in disbursing MSME loans.

The banking sector is currently somewhat jittery due to scandals and strict action taken against some bankers? Can this affect Indian banking negatively?
Narayanan P P: Banking industry of India has seen many upturns and downturns. In my experience, I believe that there are several issues that have led to certain events in the Banking Industry. Of course, in the race for short term incentives, there is always a pressure to grow and in this there are certain compromises, either knowingly or unknowingly undertaken by market participants. You may note that the term “GRC” i.e., Governance, Risk and Compliance is nowadays used more often in the financial sector than earlier. These 3 pillars have to be given importance always.

Nonetheless, the Banking Industry in India and endured in recent times. In the short run, it has been discouraged a lot. Policy changes have also taken time but what gives me comfort is that the economy, in its worst of times has still grown. The Rural economy is good example for this. Perhaps, Banks have to pivot and have to learn from its NBFC’s counterparts who have established that an operational intensive model, if executed properly is also a big winner. With the advent of technology and digital credit, credit bureau robustness enhancement, block chain, it is expected that transparency and prudence will prevail and the Banking Industry of India will emerge from this and reposition itself once again as an important player in the growth story of India.

When do you expect the NPA problem of the Indian banking sector to calm down?
Narayanan P P: Although it is tough to reply about the exact timelines, my understanding is that in the next 7 quarters, most of the banks will emerge out of this problem and stabilize. Of course, various mechanisms are in play and the trajectory is subject to those aspects playing out as well.

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