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Ujjivan Bank sees USP in Rs 200 insurance premiums, small-ticket loans

We plan to convert all existing MF branches to bank branches in a phased manner over a period of three years: Samit Ghosh

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Samit Ghosh, managing director and chief executive officer of Ujjivan
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With health and life insurance premiums as low as Rs 200 a month or loans against salaries for blue-collared workers, Ujjivan Small Finance Bank plans to make its presence felt in an overcrowded market.

Ujjivan, the newly opened small finance bank, in talks with insurance companies and the products are likely to get launched by July-August, Vijay Balakrishnan, chief marketing officer, Ujjivan Small Finance Bank, told DNA Money.

“We are currently doing research on loans against salaries for blue-collared workers. The ticket size for normal loans tends to be 10 to 12 times of average monthly salary. While big banks normally provide such loans, our target customers, the blue-collared workers, are ignored mainly because of their lower salaries and also because their salaries don't always come into their bank accounts,” Balakrishnan said.

The bank plans to tie up with small corporates, offer them the option of saving salary accounts of such workers. “Once they are on board, we would be exploring opportunities for providing various types of loans to them,” he said.

Among the products being developed are affordable life and health insurance covers starting with premiums of as low as Rs 200.

“Our main focus is making the premium affordable. Persistency is another area as most of these low-income customers tend to discontinue after paying the initial premium of a conventional insurance product which is high for them. So, we need to have a product where the insurer, event after failing to pay few instalments, can continue with the policy. That is the discussion we are having with the insurance companies,” Balakrishnan said on the sidelines of the launch of Ujjivan Small Finance Bank’s branches in the city.

Commencing its banking operations in February with pilot branches in Bengaluru, Ujjivan now has 25 branches Bengaluru, Ramanagara, Mumbai, New Delhi and Kolkata.

“We plan to convert all existing MF branches to bank branches in a phased manner over a period of three years. About 171 branches will be converted during FY18 and balance over a period of next two years. Additional 53 Unbanked Rural Centres would be opened to fill the RBI requirement of 25% branches in unbanked areas,” Samit Ghosh, MD and CEO of Ujjivan said.

The bank is being rolled out at a time when Ujjivan Financial Services, the listed promoter entity of the bank, is passing through a difficult phase and is yet to recover from the impact of demonetization even as talk of agriculture loan waivers gains ground.

While micro-lenders do not lend for agricultural activities, there are many allied economic activities to which these financiers are exposed to while talks of loan waiver generally create an atmosphere of non-repayments of any kind of rural loans.

“We have been impacted in the areas of portfolio quality as well as incremental businesses during the March quarter by demonetization that began in November. On an ongoing basis, the demonetization dislocated a large part of small businesses across the country. While the east remained largely immune, small enterprises were severely impacted in Uttar Pradesh, Vidarbha and even places such as Bengaluru, where there are many small garment factories,” Ghosh said.

Ujjivan SFB is a wholly-owned subsidiary of Ujjivan Financial Services, which was granted small finance bank licence in September 2015.

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