North-East Banking
Business & Retail heads of 2 leading private banks share their expansion and growth plans for the North-East:
Prime minister Narendra Modi had visited the North-East recently and expressed his confidence that the region has great potential. He had said: “Rich natural resources combined with talent of our youth gives our NorthEast the potential to play a key role in our development journey. India will not develop till the North-East develops.” The Modi government is considering the North Eastern Region as the gateway to SouthEast Asia and promoting financial inclusion in the region.
There are 8 states located i n the region covering an area of 262,179 sq km constituting 7.9% of the country’s total geographical area. This region has only 46 million people, which is just 3.7% of the country’s population.
Public and private banks including State Bank of India, Union Bank of India, Central Bank of India, Canara Bank, RBL Bank, Federal Bank and others have focused strategies for the region and have introduced customized products. The banks are assisting entrepreneurs with capacity building, besides financing. Some constraints pointed by the banks in the region include lack of skill among entrepreneurs, l ack of coordination between different agencies, and vital need for land reforms and digital records of land.
MAIN CUSTOMERS, PRODUCTS
The banks have introduced customized products for businesses like fishery, poultry, organic farming, arts and crafts and silk and for women self-help groups and women entrepreneurs. The banks regularly organise training programs for customers and advise them about good credit practices and financial products.
RBL Bank lends to economically active women in rural, semi-urban and urban areas under Joint Liability Group (JLG) methodology to support household business requirement. Most of the bank’s customers are first time borrowers with no past credit history. The bank provides financial education to these customers for 2 days, which is called Compulsory Group Training, and this is conducted by the bank’s field officers. All the customers are required to attend this training session. This training makes the bank’s customers aware of their roles and responsibilities towards the loan they are availing from the bank.
Anshul Swami, head – Retail, Inclusion and Rural Products at RBL Bank, says CGT creates awareness among the customers and it leads to word of mouth marketing. This encourages other women to avail credit facilities. “Our loan officers also help in promoting banking products in NorthEast. With a network of 50 BC points, we cater to more than 100,000 clients spread across the region and savings account has a penetration of 82%.”
Nandakumar V, senior vice president & business head - Network II at Federal Bank, speaks about the main customers and top 3 products of the bank in the North-East region: “Our main customers in the region are contractors and traders. And our top products are CASA, contractor advances and deposits.”
Apart from providing banking services to the customers, the banks are also helping in creating awareness among the people about frauds and the need for preventing them. They educate the public about precautions they need to take like not disclosing account details to others, etc
MARKETING & EXPANSION
Banks are using word of mouth, print media and social media channels to reach to the customers in the region. Assam, Tripura, Nagaland, and Meghalaya are the top states in the region in terms of business for the banks.
Federal Bank has 1 8 b r a nc hes functioning in the North-East spread over 5 states. (Assam-12, Meghalaya-2, Nagaland-2, Tripura-1, Mizoram-1). The bank uses word of mouth propaganda to reach to the small clusters of traders and contractors maintaining close liaison with each other in a common union in all parts of the region.
Nandakumar explains the marketing plans: “On introduction, we market by focusing and explaining our digital products to help customers understand the ease of adapting to digital channels of banking and tie-up with the channel partners for promoting various products. Marketing
through print media and social media also happens.”
RBL Bank started its operation in North East in September 2017 by opening its appointing its first BC in Assam. Today, the bank has presence in 3 states in the region - Assam, Meghalaya and Tripura.
Anshul Swami says the bank operates through its BC partners, which include RBL FinServe, a fully owned subsidiary of the bank. The bank has 50 BC partners. “Of our total exposure in the North-East, 64% is in Assam, 32% in Tripura and 4% in Meghalaya, as of June 2019. We have 228 banking outlets, out of which 31 are in the North-East. Majority of these outlets are in Tripura (52%) and Assam (45%). We are now planning to expand out BC network by 25% this year,” he elaborates.
The two banks have expansion plans for the region in the coming years, including branch network expansion and digitization of bank products.
SPECIAL INITIATIVES
Federal Bank has dedicated officials with special assignment for promotion of digital banking in the region. They are appointed at all the branches for promotion and activation of digital share in the banking channel. In some remote locations, inadequate mobile connectivity poses a challenge for the bank.
RBL Bank has micro-ATMs present in 34% of the BC outlets spread across the region and plans to increase the penetration by a considerable number in the future.
With a customer centric approach, the bank has designed a unique health insurance product for its customers. Called Hospital Cash, this is being offered by Bajaj Allianz General Insurance Co, covering the borrower and the spouse.
Anshul Swami gives details: “Under this product, we provide financial protection against any health-related issues resulting in hospitalization. The unique selling point of this product is simplified product features, benefits, sourcing and claim, no exclusion of diseases, which is generally present in all health insurance products and processing claims for any hospital (network hospital is not mandatory). The customer gets Rs1000 per day for a maximum of 30 days in a year during hospitalization.”
Even as the bank is making efforts to increase the penetration level of its existing products, it is also planning to introduce new products for the benefit of customers like individual loans.
Federal Bank’s Kolkata zonal office takes care of the administrative and business development functions for NorthEast, under which a regional office is operating in Guwahati, which handled the region. “We have opened a dedicated credit hub based in Guwahati for faster processing and servicing of advance proposals. We have dedicated verticals for sourcing our products, both assets and liability,” says Nandakumar.
NEW PRODUCTS, SERVICES
The banks have plans to introduce products like portfolio management services, online application for retail loans, financial inclusion, strategic partnerships and digital banking solutions for its customers in the North-East. Says Nandakumar: “We are planning to open a few more branches in the North-East. New services and products being launched in Guwahati are bespoke accounts which offer higher interest returns, demat accounts with simplified instant on-boarding procedures, portfolio management services and online application for retail loans.”
RBL Bank has a portfolio in the region which is worth Rs2.15 billion. Assam provides the major contribution constituting 80% of the total. Tripura’s contribution is 20% and Meghalaya’s 0.3%. The portfolio as a percentage of total financial inclusion portfolio is 4.23%. The bank is planning to increase this figure to bring maximum number of people under formal banking services, so that they can build stronger livelihoods and have strength to meet challenges and volatility in their lives.
Anshul Swami explains the details about focus areas and future partnerships of the bank: “As a bank, we will continue to develop expertise and expand our financial inclusion segments in North-East with the focus on strategic partnerships and digital banking solutions to build long-term customer relationships.”
Both the banks will focus on underserved semi-urban and rural areas of the region. They claim they will strive to deliver robust and cost-effective banking services promoting financial inclusion, growth and reducing social inequalities in the region.