R.BHASKAR BABU (MD Of Suryoday Small Finance Bank) Said: Microfinance Customers Are Also Going Digital

The coronavirus pandemic is likely to see a dramatic shift in the way microfinance customers will do banking transactions. More customers are now taking to digital to repay their loans and banks are offering short-term overdraft facilities for individual borrowers. Suryoday Small Finance Bank, once a microlender, is exploring these new opportunities. In an interview for Mint’s Pivot or Perish series, R. Bhaskar Babu, managing director and chief executive, Suryoday Small Finance Bank, discusses the strategies to navigate the situation. Edited experts:

Before April, we had not done a single digital transaction. In April, we saw 1,000 digital transactions. In May, 10%, or 100,000 of our customers, made payments through digital means without meeting us, either through UPI (Unified Payments Interface) or net banking or debit card. We have a tie-up with Razorpay. So, the customer had to click on the link without keying in the account number or loan number, and key in how much he wanted to pay.

We are now targeting 50% of customers. But hopefully, if we do 25%, it still gives us confidence that even a microfinance customer can go completely digital like you and me.

Based on what we did, we rolled out ₹5,000 overdraft (OD) facility for our customers. So, the issue earlier was these MFI customers could borrow term loans and borrow only if the group was borrowing. We were never able to solve their problems till now. So, we decided to roll out OD products at 15%, lower than our range of 9-24% MFI loans. This we decided to keep giving and pay interest for the amount they are using. It gives them comfort that there is a backup limit of ₹10,000-15,000 for business or emergency purposes. We combined digital and backstop funding. So, the behaviour of customers will change for good after this.

Sandip Ginodia , Director

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