The Hindu Business Line : Union Bank now lending to hawkers, vendors

Mumbai, July 13 Taking financial inclusion one step further, Union Bank of India has started giving loans to hawkers and vendors, through biometric cards. The pilot project was launched in Dharavi, in Mumbai, about 10 days ago, said Mr Laxman Rao, General Manager, Priority Sector, Union Bank of India.

In August 2007, the bank had launched biometric or smart cards for hawkers to help them deposit money, under its financial inclusion programme. The bank has tied up with FINO Fintech Foundation for issuing the cards. These cards store data about the customer and the account. Banking correspondents appointed by FINO go to these hawkers with ‘Point-of-Transaction’ terminals. By swiping the card on these handheld devices, hawkers can deposit their savings or borrow money.

The bank has issued about 3.5-4 lakh biometric cards across the country. Now, using the same cards and the same procedure, the bank has introduced loan products for vendors and hawkers.

These are term loans and repayment is on a weekly basis. Cutting down the lengthy procedure for determining the eligibility of the borrower, the bank has set eligibility criteria for 10 transactions, depending on the customer’s cash flow. The minimum amount for a loan is Rs 1,000 and the maximum is Rs 12,000.

The loan period is between seven and 44 weeks and the interest rate ranges between 9.93 and 13.65 per cent, depending on the amount and the loan period. The customers are mainly small vendors and hawkers who have a daily income flow. So far, the bank has given about 11 loans, and repayments have started coming in for five of them, said Mr Rao. Majority of these loans are of Rs 9,000 and one is a loan for Rs 3,000. The loans cannot be given without the smart cards.

Step to inclusion

He said, “We realised that financial inclusion would not be viable if we just open accounts. We need to offer loan products as well. As in case of deposit accounts, even for loans customers need not go anywhere. We are offering them loans at their doorsteps.”

Depending on the success of the scheme the bank will extend it other places as well, Mr Rao said.

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