Utkarsh to offer higher rates than commercial banks to woo customers

Small finance bank licensee Utkarsh Micro Finance says it will offer a percentage point more on both savings and time deposits


Utkarsh plans to convert its existing 359 branches into bank offices and open 90 new ones by the end of May. The new branches will open in the areas where they are currently operating.
Utkarsh plans to convert its existing 359 branches into bank offices and open 90 new ones by the end of May. The new branches will open in the areas where they are currently operating.

Utkarsh Micro Finance Pvt. Ltd, the Varanasi-based small finance bank (SFB) licence holder, plans to offer a percentage point more on both savings and time deposits than commercial banks, in a bid to woo customers.

“We expect that, in three to four years time, around 40-45% of the portfolio will be from micro, small and medium enterprises (MSME) and housing segment and rest will comprise microfinance loans,” said Govind Singh, managing director and chief executive officer at the lender.

“The long-term partnership with RBL Bank will help us augment our bouquet of products and services, including ancillary services. We hope to greatly benefit from RBL Bank’s domain knowledge of the banking and financial sector,” said Singh.

Private sector lender RBL Bank had acquired a 10% stake in Utkarsh Micro Finance in September for an undisclosed amount. Currently, more than 90% of Utkarsh’s portfolio comprises microfinance lending and the rest is loans to MSMEs and housing.

“Offering higher interest rates will not guarantee more deposits. They have to gain trust of people, which will be built over time,” said Naresh Makhijani, partner and head of financial services at KPMG in India.

Utkarsh plans to convert its existing 359 branches into bank offices and open 90 new ones by the end of May. The new branches will open in the areas where they are currently operating.

“We are adopting e-KYC in a big way so that there is seamless on-boarding of customers having Aadhaar cards. This will improve customer experience,” Singh added.

“From 1 April, we will cut at least 100 basis points for microfinance borrowers, and on housing, we will offer close to 15-16%,” added Singh.

The bank plans to add 1,000 employees, of which 300 will be for the liability side and the rest will be to expand its joint liability group business. Its current headcount stands at 3,200.

Utkarsh intends to start banking operations by 14 January and is waiting for the final nod from the central bank.

As reported by Mint on 9 November, Equitas Small Finance Bank is offering higher interest rates than commercial banks on term deposits. Suryoday Microfinance Pvt. Ltd plans to focus on smaller term deposits of between Rs50,000 and Rs1 lakh and will offer depositors close to 9% as interest rate for a one-year term deposit, Mint had reported.

So far, only four entities—Equitas, Suryoday, Capital Small Finance Bank and Ujjivan Financial Services Ltd—have received the final approval from the central bank to set up a bank.

After the government’s move to demonetize high-value banknotes, Utkarsh Micro Finance has deferred payments by six days. Disbursement currently happens only through cash.

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