YES Bank strength­ens its MSME lend­ing

Su­mit Gupta, group pres­i­dent & na­tional head, Busi­ness & Ru­ral Bank­ing at YES Bank, speaks about the bank’s lat­est part­ner­ship with OPIC and Wells Fargo and its plans to in­crease MSME lend­ing in 2017-18:

Banking Frontiers - - Hihglights - Me­hul@bank­ingfron­

Su­mit Gupta, group pres­i­dent & na­tional head, Busi­ness & Ru­ral Bank­ing at YES Bank, speaks about the bank’s lat­est part­ner­ship with OPIC and Wells Fargo and its plans to in­crease MSME lend­ing in 2017-18

Me­hul Dani: What are the salient fea­tures of YES Bank’s lat­est part­ner­ship with OPIC and Wells Fargo? Any up­date on ear­lier tie-ups?

Su­mit Gupta: Un­der the agree­ment, OPIC will pro­vide $75 mil­lion in fi­nanc­ing and up to $75 mil­lion in syn­di­cated fi­nanc­ing jointly ar­ranged by Wells Fargo Bank and OPIC to YES Bank. Specif­i­cally, $50 mil­lion of the fi­nanc­ing will be used to ex­pand sup­port to women-owned busi­nesses, while an­other $50 mil­lion will be used for fi­nanc­ing SME busi­nesses in low-in­come states. This agree­ment fur­ther strength­ens YES Bank’s abil­ity to fund and sup­port the unique needs of SMEs and the en­tre­pre­neur­ial ecosys­tem, thereby boost­ing the de­vel­op­men­tal agenda in low­in­come states of In­dia. It also un­der­scores the po­ten­tial of YES Bank’s busi­ness and fi­nan­cial model. This fa­cil­ity will sup­port fi­nanc­ing to women en­trepreneurs in In­dia for driv­ing fu­ture eco­nomic growth and job cre­ation.

You have also part­nered with In­ter­na­tional Fi­nance Cor­po­ra­tion and Women En­trepreneurs Op­por­tu­nity Fa­cil­ity by draw­ing a $50 mil­lion loan in March 2016 for mo­bi­liz­ing cap­i­tal for women en­trepreneurs. What is the lend­ing from this fa­cil­ity so far? The bank has suc­cess­fully ex­e­cuted two sim­i­lar fa­cil­i­ties over the past 2 years. Please pro­vide an up­date in this re­gard.

Our part­ner­ship and MoU of $50 mil­lion with IFC Wash­ing­ton un­der the Women En­trepreneurs Op­por­tu­nity Fa­cil­ity has been fully uti­lized to­wards fi­nanc­ing of women owned MSMEs. This project was part of the Women En­trepreneurs Op­por­tu­nity Fa­cil­ity (WEOF), the first-of-its-kind global fa­cil­ity ded­i­cated to ex­pand­ing ac­cess to cap­i­tal for ap­prox­i­mately 100,000 women en­trepreneurs. It was launched by IFC, through its ‘Bank­ing on Women’ pro­gram, and Gold­man Sachs 10,000 Women in 2014. We re­main com­mit­ted to ex­pand­ing ac­cess to fi­nance to the un­banked and un­der­served pop­u­la­tion and achieve our vi­sion of re­spon­si­ble bank­ing. We con­tinue to forge in­ter­na­tional link­ages to sup­port the needs of the MSME seg­ment.

What is the to­tal amount of loans given by your bank to MSMEs in In­dia this year and last year? What is the to­tal fi­nanc­ing to women en­trepreneurs in In­dia in 201617 and its yoy growth?

As of Q1FY2018, our lend­ing to medium en­ter­prises and mi­cro & small en­ter­prises rep­re­sents 21.4% of the bank’s ad­vances amount­ing to `29,953 crore. In Q1FY2017, the lend­ing to this seg­ment amounted to `24,472 crore. We are fo­cused on build­ing a ro­bust MSME fran­chise based on our ex­pand­ing branch foot­print along with a ded­i­cated knowl­edge bank­ing fo­cus. Go­ing for­ward, we con­tinue to ex­pect that the share of re­tail and MSME lend­ing in our port­fo­lio to grow as we re­al­ize our vi­sion of ‘Build­ing In­dia’s Finest Qual­ity Big Bank by 2020.’

How is the bank’s or­ga­ni­za­tional set-up to meet the re­quire­ments of the SME seg­ment? What is the sup­port from SIDBI and Mu­dra?

We have a sep­a­rate busi­ness ver­ti­cal – Busi­ness Bank­ing - to cater to the fi­nan­cial needs of MSME cus­tomers. Busi­ness bank­ing is fur­ther di­vided into Small Busi­ness Bank­ing and Emerg­ing Busi­ness Bank­ing, based on the cus­tomer turnover. Ev­ery cus­tomer is man­aged by a ded­i­cated re­la­tion­ship man­ager who un­der­stands the fi­nan­cial needs of the cus­tomer and pro­vides so­lu­tions ac­cord­ingly. Busi­ness Bank­ing is present in 200+ lo­ca­tions across In­dia cov­er­ing over 500 YES Bank branches.

We con­tin­u­ously en­gage with SIDBI on var­i­ous ven­tures like fund­ing en­ergy ef­fi­ciency pro­grams of MSME units, fund­ing man­u­fac­tur­ing units un­der Make in In­dia scheme, pro­vid­ing work­ing cap­i­tal fi­nance to ex­ist­ing SIDBI cus­tomers, etc.

In ad­di­tion to just pure play busi­ness re­la­tion­ships, we are work­ing on ini­tia­tives like ‘Say YES to Sus­tain­able MSMEs’, help­ing them en­hanc­ing their en­vi­ron­men­tal and oc­cu­pa­tional health and safety per­for­mance to help them be­come glob­ally com­pet­i­tive. Over the last 2 years, we have worked with over 1000 MSMEs

in 9 states and helped re­duce 6000 met­ric tons of CO2 emis­sions from these MSMEs.

We are also pro­mot­ing Mu­dra loans through our strate­gic tie-ups in e-com­merce fund­ing and through our branch net­work.

Are SMEs in In­dia in­vest­ing in IT? Are you us­ing so­cial me­dia for mar­ket­ing your SME prod­ucts? What is the ra­tio of on­line to off­line loan ap­pli­ca­tions from SME units at YES Bank?

SMEs in In­dia have lately started in­vest­ing in tech­nol­ogy and au­to­ma­tion to im­prove ef­fi­ciency of their busi­nesses. They have started re­al­iz­ing that dig­i­ti­za­tion / au­to­ma­tion is the need of the hour.

We use so­cial me­dia to spread aware­ness of our ex­per­tise and our Busi­ness Bank­ing lever­ages on this to cre­ate knowl­edge and de­mand for our prod­ucts. We have also started a ded­i­cated ‘YES SME’ show­case page on LinkedIn to pro­vide ex­ten­sive knowl­edge trans­fer among MSMEs and var­i­ous do­main experts. This has been highly suc­cess­ful and helped us garner mind share among MSMEs and con­vert this into grow­ing mar­ket share. Re­cently, we also launched the 360-de­gree ‘Say YES to GST’ cam­paign for MSMEs to help them be­come GST ready and lever­age the ad­van­tages of this tec­tonic pol­icy re­form.

We do re­ceive on­line ap­pli­ca­tions for MSME loans and while this is not a ma­jor con­trib­u­tor as of now, we con­tinue to in­vest in dig­i­tal tech­nolo­gies to ac­quire MSME cus­tomers.

How has been the NPA with re­gard to SME loans in 2016-17? What are the im­prove­ments in risk man­age­ment for MSME loans?

Our NPA lev­els are one of the low­est in the in­dus­try. We have been able to keep NPA lev­els low on ac­count of ro­bust cus­tomer se­lec­tion. Our risk as­sess­ment mod­els take into ac­count var­i­ous in­ter­nal and ex­ter­nal fac­tors and are sup­ported by a 3-tier ar­chi­tec­ture, which also con­sists of spe­cial­ized sec­tor fo­cused prod­uct man­agers. We also have a strong col­lec­tion mech­a­nism in place. In the cur­rent year, we have re­cal­i­brated our cus­tomer se­lec­tion mod­els and strength­ened our early warn­ing sys­tem. Ear­lier, we had in­tro­duced an MSME scorecard to quickly as­cer­tain risks for MSME lend­ing and em­power our sales and re­la­tion­ship man­agers to make an in­formed credit de­ci­sion.

What are the tar­gets and the ex­pan­sion plans for sup­port­ing the MSME seg­ment?

We plan to grow the Busi­ness Bank­ing book at a rate higher than in­dus­try. Our fo­cus is to build a gran­u­lar port­fo­lio. We will also be fo­cussing on build­ing the chan­nel fi­nance fran­chise of our busi­ness. We con­tinue to fo­cus on our dif­fer­en­ti­ated knowl­edge bank­ing phi­los­o­phy and build teams of sec­tor experts who can of­fer customised and spe­cialised so­lu­tions ad­dress­ing the needs of MSMEs. Such sec­tor spe­cific so­lu­tions along with in­vest­ment in tech­nol­ogy have helped us emerge as a bank of choice for the MSMEs.

YES Bank now has an es­tab­lished branch foot­print of over 1000 branches and the branch chan­nel is an im­por­tant con­trib­u­tor to our busi­ness. We will con­tinue to lever­age this chan­nel for cus­tomer ac­qui­si­tion and ex­pan­sion in 2017-18.

Su­mit Gupta points out that SMEs have been lately in­vest­ing in tech­nol­ogy and have re­al­ized the value of au­to­ma­tion

Dev Ja­gade­san, act­ing pres­i­dent and CEO, Overseas Pri­vate In­vest­ment Cor­po­ra­tion, and Arun Agrawal, group pres­i­dent and global head, In­ter­na­tional and In­sti­tu­tional Bank­ing, YES Bank, signed a loan agree­ment to sup­port SMEs in In­dia. Mitesh Sanghvi,...

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