How are you positioning Vikas loans?

As the JLG model graduates, people want to be treated as individuals for their financial requirements. They don’t want to be clubbed and treated only as a customer number. The groups of JLG aren’t as homogeneous as it used to be 15 years ago. As a bank we can cater to people above ₹3 lakh of household income for specific purposes. Quite a bit of customers are graduating from the JLG model, and their income obviously isn’t the same when the household income goes up. Vikas loans were primarily started for such customers. At present, the loan is for existing customers. But we are in the process of rolling it out to new-to-bank customer having a track record with other microfinance institutions. Vikas loans are about ₹1,200 crore of portfolio with two lakh customers.

How would you assess these customers?

Income assessment will have 30-50 per cent weightage. Because of the QR code a substantial piece of the income for the merchants in urban- and semi-urban, and probably even in rural, is getting captured by about 50-60 per cent. There is now a good amount of data to understand the income streams. The next one is their track record. If somebody has passed through both waves of Covid, except for cash flow delays, and is displaying the intent and ability to repay, it helps. The other factors we are trying to build is see what their kids do — are they really going to school? Is the household looking to graduate themselves like investing in education as this is a good indicator of their aspirations. Entire repayment happens to our bank account. The next step we will do in FY24 is to get them included for PMJJY, and so on.  

Will PMJJY help you cross sell and earn fee income?

We found that of the 15,000 claims, which did credit life, not many have PMJJY. The person, mostly the spouse or the lady of the house, hasn’t taken it or not renewed it or hasn’t told the family about it. The insurance product may not give us income, but will bring stickiness because if the customer is dealing with Suryoday, we don’t do only lending or savings, but take care of an insurance product. It’s not cross-sell for us. The customer won’t be missold because we look at it as the basic thing everybody requires. It is not income generating for the bank.

What’s the long-term plan on the assets mix?

We’ll transition ourselves to 50:50 mix in terms of secured assets and inclusive finance over the next two years. This is a great business to be in, provided you’re looking at this as a graduating process for the customer and the bank. There’s a platform where I can give an OD limit, term loan, and eventually even a home loan. We can assess the household income in a holistic basis. Also, this business is about how one manages risk. It must be a slow process. You don’t give a loan of ₹2 lakh just like that. Start at ₹50,00 to a lakh, get more data, and once you’re convinced that they are in the real business, there’ll be comfort. Lending more money is bad for the lender, but it can be very bad for the borrower. It cannot be caveat emptor, it also has to be the provider beware, and this is the responsibility we are taking when lending to low-income households. It makes sense to retain and reinvest in the existing relationships than just acquiring new customers. Vikas loan is one such product.

When all your peers are keen to reduce MFI exposure, you want to maintain it at 50 per cent …

In the previous model, unsecured loans were unsecured. Now, if assessed properly unsecured is as good as secured. You will hardly come across customers paying everything properly on secured loans and defaulting on unsecured. There could be delay, unless the customer is overleveraged. As we look at more data, it tells us that if Kumari has a house loan and her son has taken a vehicle loan and both are behaving properly, there’s a 90-95 per cent chance the unsecured loan will also not be defaulted.