Specialised officers who are trained internally take care of MSME vertical to ensure that the ultimate connotation is achieved. The saral centres are working at various regional offices. Currently, Union Bank’s MSME asset size stands around Rs69,000crore. Technology equipped operational system, App-based dealing comforts, quick response to the changes taking place in the market, simplification of processes and systems through platforms like Saral, etc make the bank a comfortable destination for MSME transactions including credits. The bank has been growing at the rate of close to 10 per cent in MSME business.
Transparent and professionally-run MSMEs can always find timely credit supports from commercial banks in better terms to the extent they would require, though credit is not the sole necessity for determining their success. MSMEs need to be more transparent and professional to remain favourites of lenders. Commercial banks have enough funds to support them. Commercial banks are always ready to help entrepreneurs and their projects. Banks have an admirable legacy of lending small business and extending constant support throughout their lifetime. “In fact, we are still ready to reach out to new clusters and support MSMEs, provided they are eligible for a credit and we are convinced about their business model,” says Mr P.S Rajan, General Manager in charge of Credit Policy and MSME Department at Union Bank of India. As a responsible commercial bank, Union Bank ensures total adherence to the Reserve Bank of India (RBI) directives but approaches the MSME with deserving importance.
“We try to make their life easier,” says Mr Rajan.
Over the years, as far as MSME banking is concerned, much has changed in terms of delivery and product packaging. Keeping pace with the change of time, Union Bank has come a long way, thanks to the adoption of the technology platform and necessary internal restructuring that has made delivery easier and faster with better efficiency. As time has changed, the bank found it necessary to transform itself migrating to cutting edge platform with highly efficient systems and processes in place. Behind this were two aims; faster delivery by cutting turnaround time and better underwriting quality. Union Bank could achieve these, he points out. While every branch is a touch-point for a loan, it has introduced what is called the saral, which means simple, obviously meaning simplification of process mechanism. This was introduced as a part of its rebranding and revamping exercise undertaken by the bank in the name of Nav Nirman more than a decade ago. With saral the bank aimed at cutting all the barriers in the course of processing of a proposal and ensured a direct approach towards MSME business. Specialised officers who are trained internally take care of this vertical to ensure that the ultimate connotation is achieved.
“The verticalisation and centralised processing under the Saral concept have changed the way the bank handles MSME proposals. It is the straightforward method that ensures faster processing of proposals and the intervention of experts in taking necessary steps based on the nature of business and the proposal.”
The saral centres are working at various regional offices where all activities are carried out under the single-window concept. The branches, which generate business leads, are also involved in ensuring faster decision making. In places where the saral is not operational branches forward the proposals to the credit department of the regional office. At present, 45 sarals are operational. In any manner, the processes are carried out faster, thanks to the technology, Mr Rajan points out. On the other side, proposals coming to branch level, if those are within the power of the branch, are sanctioned and disbursed at the branch level itself. Every proposal usually requires due diligence procedure about the promoters and their projects, conducting techno-economic feasibility study, assessment of financial aspects and credit requirements and also credit risk assessment.
Commercial banks do not consider NBFC’s presence in the MSME market as a competition. They are in fact, complementing the segment, where plenty of business entities are still not eligible for credit under the prevailing regulatory framework. The bank assesses working capital requirement of an MSME up to Rs 5 crore on the basis of turnover. It estimates 25 per cent of the turnover as a working capital requirement and 20 per cent is funded by the bank with the remaining portion as margin money to be brought in by the promoters. The requirement of above Rs 5 crore is assessed on the basis of the flexible bank finance method. The bank assesses the credit requirement based on the broad study of the borrower’s business operations, business cycles, projected levels of inventory and receivables in relation to the earlier trend, market development, industry trend etc. At the same time, term loans are appraised based on the viability of projects after making a thorough assessment of the borrowers’ repayment capacity, breakeven point and other financial parameters like rate of return, debt-equity ratio and fixed assets coverage ratio.
“Commercial banks do not consider NBFCs’ presence in the MSME market as a competition. They are in fact, complementing the segment, where plenty of business entities are still not eligible for credit under the prevailing regulatory framework. That is the market NBFCs serve with their products. Moreover, the MSME segment is too vast for any number of players to find enough space.”P.S RAJAN
Credit Policy and MSME Department
Union Bank is one of the fastest-growing commercial banks with more than 4200 branches across the country. Its core values of prudent management without ignoring opportunities, as it says, could support many small enterprises over many decades to come up in the course of their business history. Now also it is open to go any extent to support the industries from within the policy frameworks of the bank and regulatory stipulation. This year, the bank, which is a symbol of trust for millions who owe to the bank for their success, has turned centurion. In a way, as a commercial bank, it has been playing a proactive role in the economic growth of India. Today, its customer base constitutes more than 57 million people. As a growth strategy, the bank pursues all the government schemes in the right spirit, besides making its own plans for business expansion with a sense of commitment as a public sector institution.