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Vipin V. Nair

Mr K.B Sudheer Babu

Kochi , May 2

KERALA State Financial Enterprises Ltd (KSFE), a State-owned non-banking financial institution, will aggressively market its personal and vehicle loans this fiscal to offset the slow growth in its mainstay, the chit business.

Its Managing Director, Mr K.B. Sudheer Babu, is optimistic that KSFE can effectively compete with new generation banks through a series of initiatives that are in the pipeline. Excerpts from an interview:

How is your chit business doing now?

Our chit business grew by 6.7 per cent during 2004-05 over the previous financial year. The total chit amount now stands at Rs 149.19 crore as against the budgeted Rs 145 crore for the year. Chit business contributes more than 60 per cent of our income and turnover. The number of subscribers has increased to 7.70 lakh from 7.69 lakh and the average subscription has gone up to Rs 1,936 from Rs 1,815 a year ago.

However, the rate of growth in chit business is not increasing as expected due to various extraneous factors such as reduction in the rate of interest. But if we analyse the percentage of chit business done by KSFE with the total income-earning people in the State, there is tremendous potential.

So we are introducing many value addition to the chit business. For instance, we are writing off future liability of prized subscription up to Rs 1 lakh in the case of the subscriber's death. Also, debit cards to non-prized subscribers, green card for prompt and valuable customers, incentives for non-prized prompt subscribers and introduction of a chit scheme with fixed dividend are being planned.

We also intend to extend the facility of daily door collection, now available only in a few branches, to almost all the branches. We plan to use the services of Kudumbasree units across the State as chit canvassing agents. This will help us reach out to the rural areas and also give indirect employment to at least 500 people during the year.

How do plan to ramp up your non-chit business in the face of stiff competition from banks?

We are now offering a number of products such as personal loan, housing loan and vehicle loan to customers. In 2004-05, our gold loan grew by 39 per cent, while personal loan increased by 60 per cent. However, other lending schemes such as housing and vehicle loans declined. This was because of intense competition from banks and other financial institutions. The lack of tie-ups with manufacturers, not participating in `loan melas' and absence of large publicity campaigns had an impact.

We are now planning to launch a scheme called `Easy Car Loan'. We will be tying up with vehicle manufacturers and pass on any subvention to the customers to reduce the effective rate of interest. We have now budgeted Rs 26.36 crore in the current fiscal for vehicle loan. In the case of personal loans, KSFE offers the cheapest rate in the market today. We have enhanced the loan amount on personal surety to Rs 1 lakh. This year we expect to increase our `Reliable Customer Loan' by at least 25 per cent.

What are the immediate plans to increase your reach and services?

We will be opening satellite branches across the State in rural and backward areas to reach out to more people. These branches will function under an assistant manager. Once the business reaches a sufficient level, we will look at converting them into a complete branch. During this financial year we plan to open 50 such branches. Another 25 new branches will also be added to our existing 255 branches. We are also embarking upon computerisation of our branches. A sum of Rs 30 crore has been earmarked for this. In the first phase this year, we plan to install one computer at all branches and automate 66 branches. The tendering process for this is in the final stages now. In addition to all this, KSFE is also planning a `virtual branch' to tap non-resident Keralites.

How has been the overall financial performance of KSFE in 2004-05?

I would say our performance in the year was satisfactory, given the present environment of cut-throat competition. Our (provisional) profit was Rs 45.03 crore as against Rs 42.29 crore in the previous year. Our total income during the year was Rs 266.05 crore. Also, in 2004-05 we started fee-based activities such as corporate agency tie up with Life Insurance Corporation and Western Union Money Transfer to generate income from fee-based activities.

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