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Small Finance Banks play a key role in priority sector lending: Sanjay Kao, Chief Business Officer, Ujjivan

Mr. Sanjay Kao
Ever since the RBI granted differentiated banking licenses to Small Finance Banks (SFBs), there has been a world of difference to customers of SFBs like Ujjivan.
SFB licenses are more restrictive than a regular bank license, such as one given to State Bank of India (SBI) or ICICI Bank. While small finance banks can undertake fundamental banking activities such as deposit taking and lending, they are not allowed to set up subsidiaries. Also the loan ticket size is much smaller in SFBs compared to regular banks.
“Small finance banks play a key role in the priority sector lending space as our main focus is the unserved and underserved segment,” said Ujjivan’s Chief Business Officer Sanjay Kao who also heads CSR there.
Prior to joining Ujjivan, he was the Head of Consumer Business at Dunia Finance in Dubai. He also spearheaded Consumer Finance for Royal Bank of Scotland in Asia and held leadership roles with Citibank in Asia Pacific. Sanjay started his career with Unilever India and holds a Business Management Degree from IIM Kolkata and a Bachelors degree in Chemical Engineering from IIT Varanasi.
Kasmin Fernandes from The CSR Journal talked to Mr. Kao about the role SFBs play in small sector lending and how they can be instrumental in building a financially inclusive India.

How can Small Finance Banks improve financial inclusion of women?

Most of the Small Finance Banks like ours were earlier microfinance companies which used to provide loans to women. Now that we have become a bank, our female customers can avail Ujjivan’s full banking solutions. Also, through different CSR initiatives, Small Finance Banks reach out to women customers and make them understand the need of financial planning and banking services.

What does Ujjivan do?

For 12 years, Ujjivan was a microfinance company. It received the Small Finance Bank license from RBI in the year 2016 with the aim to drive financial inclusion further for the unserved and underserved or the unbanked community.
Though the lives of the middle class have changed significantly in the last couple of years with the presence of commercial sector banks, the mass market still remains inadequately served.
Ujjivan’s mission is to provide a full range of financial services to the mass market, leveraging the latest technology and, over the course of next seven years, serve at least 40 million customers.

What is your take on corporate social responsibility?

We do not consider CSR as a typical responsibility; we strongly believe that we should give back a share to society. It’s a part of our DNA and one of our core purposes.

What is the impact of your Community Development Programme, Chote Kadam?

Ujjivan started the Community Development Program Chote Kadam way back in 2006 with an objective to give something meaningful back to the community based on their needs.
Our projects are selected and then executed in a way which is purely based on requirements and decided by the community. We focus on the broad categories of public infrastructure facilities (bus stops, drinking water facility, street lighting), education (upgrading schools), health care (improving health centres) and environment.
Through Chote Kadam, our aim is to serve unmet community needs of the unserved and underserved beyond financial services. Since 2010, the Community Development Programme of Ujjivan has reached out to more than 12 lakh beneficiaries through around 2,000 community-based interventions across India.

What are the other CSR projects Ujjivan is involved in?

Ujjivan Small Finance Bank has a strategic partnership with sister concern Parinaam Foundation to carry out social welfare efforts. Apart from Chote Kadam, Ujjivan in partnership with Parinaam Foundation is also part of Diksha Financial Literacy Programme. Diksha FLP is designed to give low-income families the knowledge and tools they need to save safely, reduce financial risks and make informed, intelligent financial decisions.
In 2017, Ujjivan created a documentary named ‘Paison ki ABCD’ conceptualized and executed in partnership with Parinaam Foundation. The key objective of this film was to promote financial literacy and economic empowerment for the underprivileged.

How did the differentiated banking licenses from the RBI in 2017 change things for SFBs?

Ujjivan SFB commenced its operations as a Small Finance Bank with effect from February 1, 2017. When we were a microfinance company, our mandate was only limited to lending. However, post receiving the license, our customers can now avail various banking solutions like any other bank customers.
It opened up the world of banking to our customers and in the unserved and underserved segments. They felt welcomed at Ujjivan, which was a new experience for them, as they were earlier shunned as customers in the previous engagement with banks. At Ujjivan they were welcomed with respect and empathy. They can not only avail loans but also open Savings accounts, enjoy high interest rates offered by SFBs on Fixed Deposit and Recurring Deposit.
The most interesting part is that earlier, this segment (unserved and underserved) was either deprived of these banking solutions or had problems in understanding banking facilities.

What role do SFBs play in priority sector lending?

Small Finance Banks play a key role in the priority sector lending space as our main focus is the unserved and underserved segment. SFBs not only serve to provide banking solutions but empower the socio-economic progress of its consumers. We mainly cater to sectors like agriculture and allied activities, MSMEs (micro and small enterprises) and other low income groups.
Our business model gives us the opportunity to communicate with these people (customers) on a regular basis which in turn helps us to gather intelligence and understand customers’ basic requirements that needs immediate attention.

How can SFBs affect the landscape of rural businesses and contribute towards nation building?

In a developing nation like India, the rural economy is very important because of its vital supply and demand links with the other Indian industries. Taking this into account, SFBs can play an important role in the supply of credit to Micro and Small Enterprises, agriculture and banking services in unbanked and under banked regions in the country.

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The CSR Journal Team