With New Policies, MSMEs Are Going Cashless, Says This Banker 'The characteristic feature of MSMEs is such that throughout these geographies there is potential'

With 30 per cent of its loan book dedicated to micro, small and medium enterprises (MSME) segment, Mangalore-based Karnataka Bank is very bullish on this sector. Mahabaleshwara M.S., Managing Director, Karnataka Bank, during a tête-à-tête with Entrepreneur, shares his insights on the growth of fintech and the MSME segment. Edited excerpts.

How is Karnataka Bank contributing to MSMEs growth curve?

We have about 21 per cent of our total branches in the rural area, 23 per cent in semi-urban, 27 per cent in urban and 29 per cent in the metro cities. The characteristic feature of MSMEs is such that throughout these geographies there is potential. So, when we are planning for about 15 per cent plus growth, this (MSME portfolio of the bank) is an area which provides an opportunity for us.

Furthermore, we also have the infrastructure to serve other banking needs of the MSME customers apart from term loan or capital
requirement.

The MSMEs' banking requirement has undergone a change – from cash to cashless. With new banking facilities like NEFT, RTGF, IMPS, most of their transactions are digital. So, our teams are reaching out to them for services like a point of- sale machine which will help them with migrating their transactions to a digital channel.

And how much do MSMEs contribute to the bank's loan book and NPAs book?

Our MSME portfolio is around 30 per cent of the loan book. My total gross non-performing asset (NPA) is about 4.34 per cent, of which MSMEs is contributing 5-8 per cent.

So for us, MSMEs is a profitable portfolio. We are optimistic about the fact that we have put extra exposure to the segment.

Do you have special products for your MSME customers?

We have credit products where MSMEs can avail loan for up to Rs 5 crore and have facilities for speedy dispersal.

On the other hand, they can also avail loans up to Rs 1 crore under CGTMSE scheme. And for people who have security-related issues, we have some institutions in place which can be useful for them.

Additionally, we give about 0.50 to 0.75 per cent concession to women entrepreneurs through our credit products.

And do you perceive fintech as a competitor or collaborator?

No banker would perceive fintech as a competition; there is a lot of scope for collaboration and cooperation between banks and the fintech companies.

Collaboration of our business model with theirs will always be a win-win situation for both the entities and ultimately, the customers are going to benefit from the entire arrangement. We are very positive about fintech. I am already in a dialogue with some of the prominent companies for collaborating with us.

Few of the national banks have announced start-up funds; can we expect the same from Karnataka Bank?

We are not planning start-up funds right now. But, if there is any collaboration which is equally favorable to the bank, we are willing to explore.

(This article was first published in the December issue of Entrepreneur Magazine. To subscribe, click here)