Suryoday Small Finance Bank (SSFB) sees its microfinance customers as potential cross-selling targets for micro housing loans, micro loans against property (LAP), and two-wheeler loans.
The Navi Mumbai-headquartered bank, which has a customer base of about 18.5 lakh and gross advances of ₹4,872 crore (as at December-end 2021), plans to launch micro-LAP and two-wheeler loans in the next three months.
It also plans to extend offers of micro housing loans — introduced about seven months back at 12 branches — to at least 200 branches next year (FY2023), said Baskar Babu R, MD and CEO.
He observed that, on the assets side, the bank has 70 per cent of the business in inclusive finance (unsecured group loans given to micro-entrepreneurial women for income-generating activities built on the joint liability group model) and 30 per cent in non-inclusive finance (commercial vehicle loans; affordable housing loans; secured business loans; micro business loans; and so on).
Babu emphasised that SSFB is eyeing a business mix of 50-50 by mid FY2025.
Inclusive finance mix
The bank is looking to deliver micro home loans (₹3-10 lakh) in the inclusive finance category. It is difficult to cater to the demand for this product in the absence of a large existing customer base, he said.
“Also in the works is a micro-LAP (₹3-5 lakh) for business enhancement with a five- to seven-year tenor. Usually, loans in the microfinance segment are restricted to two years.
“So, instead of running 3-4 loans of ₹40,000-50,000 each, a customer can take just one loan and have an EMI (equated monthly instalment) burden that is much lower. This gives them space to invest in long-term assets,” Babu said.
Two-wheeler loans
SSFB will be introducing two-wheeler loans to its existing customer base, to begin with.
“Majority of the microfinance customer households will have two-wheeler purchase coming up once in three years.
“For instance, a customer’s son getting into gig work with a food delivery service firm will probably start off with buying a second-hand bike. And once he is in service for a year or two and has his own savings, he will buy a new vehicle,” Babu said.
So, instead of a customer going to a dealer to find out his or her eligibility for a two-wheeler loan, they can approach the bank, which will pre-approve the loan since it knows the household.
“So, what we are envisaging is that a customer can simply walk into a dealership and take delivery of the vehicle. And the pricing will be as competitive as they can get — in fact ,much better,” Babu said.
While there is a huge potential in the gold loans business, the SSFB chief said his bank will enter at an opportune time when it can build scale in terms of distribution.