Nitin Chugh, MD & CEO, Ujjivan Small Finance Bank:
Firstly, we need to analyze the situation that we are going through and that will determine the co-drivers. In addition, we need to find ways of living with covid until everybody gets vaccinated. Financial institutions are functioning during the pandemic by adjusting working models. Secondly, there is a change in the behavior of customers who have adopted habits that are unlikely to go away. Most of them will prefer remote interactions and transactions that they can do on their own. A large chunk of our customers will want to transact with the banks and MFIs differently. Thirdly, we have taken the step from the regulatory point of view in terms of liquidity inclusion, ie measures that will bring back demand for credit in a healthy manner. These things will also define the market components, and profoundly, we will have serious players left in the market. The microfinance business attracts a lot of players; for example, State Bank of India is making a strong push for re-entering microfinance business. This means that it is a good business to be in.
Financial institutions that do not have a long-term vision of being in this industry and serving these customers will most likely find their way out. The microfinance market will remain only for the companies which have invested in technology and which are taking all the regulatory intervention very seriously and have a long runway and a roadmap ahead of them. This will open the path of consolidation in the industry. Cashless and digital are not the same and there is a need to provide alternatives to the customers. We need to provide alternate ways of collecting repayments from customers. We must expand available options like wallets, tie-ups and we are trying to use different platforms, which will give us access to many other apps and consistently wallets to deal with.
Ujjivan Small Finance Bank has made an alternate arrangement for collections. We have a tie-up with Airtel Payments Bank and we are using its points as our collection points for the benefit of our customers. We are rolling out branches and enabling points that are around that branch and this has helped us in combining the alternate ways of collection. We have clearly moved from 16% of the alternate ways of collecting digital or cashless, to nearly 37% in June 2020 through the non-traditional ways of collecting and depositing from the customers. This gives us the confidence that this model can be made to work. It does not have to be only based on a digital interface.
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