Beruflich Dokumente
Kultur Dokumente
Submitted to - Submitted by –
Mr. Saibal Paul PGDM C | Group 7
Ojasvi Bhartiya (17DM155)
Pallavi Singh (17DM156)
Rishabh Agarwal (17DM185)
Sandeep Bansal (17DM207)
Sanjukta Chakraborty (17DM208)
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1. INTRODUCTION
Financial services are the economic services provided by the finance industry, which
encompasses a broad range of businesses that manage money, including credit unions, banks,
credit card companies, insurance companies, accountancy companies, consumer-finance
companies, stock brokerages, investment funds, individual managers and some government-
sponsored enterprises.
Over time, microfinance has emerged as a larger movement whose object is "a world in which
as everyone, especially the poor and socially marginalized people and households have access
to a wide range of affordable, high quality financial products and services, including not just
credit but also savings, insurance, payment services, and fund transfers.". For many,
microfinance is a way to promote economic development, employment and growth through
the support of micro-entrepreneurs and small businesses; for others it is a way for poor to
manage their finances more effectively and take advantage of economic opportunities while
managing the risks. The terms have evolved - from micro-credit to micro-finance, and now
'financial inclusion'.
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2. ABOUT THE COMPANY
Why it started?
The motivation behind the inception of Ujjivan was to serve the low-income population in the
Indian urban areas. It is perceived that the urban poor are better-off as compared to the rural
poor section but they find it difficult to access financial services. Despite the large network of
bank services in the cities, the urban poor section find their financial needs unmet and they
have to resort to informal credit from moneylenders that may demand interest rates as high
as 10% per month.
1. The financial inclusion of those sections of the economy that were not being served
by other banks
2. Provide savings accounts to the section of society that was unserved.
3. Supply credit to small business units, farmers, etc. through high technology and low
cost of operations.
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3. BUSINESS STRATEGY
While most MFIs concentrated their operations majorly in rural demography, Ujjivan saw the
untapped urban market as an opportunity to expand. Ujjivan implemented a short-term
strategy allowing poor women to access newly available financial products and services. First,
the company conducted market research in potential communities in order to understand
urban customers’ profiles, needs, and current alternatives to obtaining financing. Second, it
provided financial incentives for locals from the targeted communities to join Ujjivan as
Customer Relations Staff (CRS), helping the company to make inroads into the urban market,
particularly in slums. Next, Ujjivan developed its pilot initiative, which focuses on adapting
the Grameen and SHG models to the urban environment in Bangalore. After its initial success,
the company’s operations were replicated throughout India.
In pursuing its Mission of "providing a full range of financial services to the economically active
poor, to build a better life", Ujjivan has been balancing its dual objectives of "social and
financial goals”. “Responsible financing, ethical values and transparency in all its dealings with
its customers, lenders, investors and employees" have been the cornerstone of its operations.
Transparency in the decision making process has been providing comfort to all stakeholders,
particularly the lenders and investors.
Financial Performance:
Ujjivan Financial Services Limited serves nearly 40.3 lakh customers through 462 branches
and 13,169 employees spread across 223 districts and 24 states in India. Its Gross Loan Book
stands at ₹8,317 crore in FY 2018-19 (Quarter 2). It has over 367 full-service banking outlets
with a deposit base of ₹4,188 crore as of Quarter 2 results in FY 2018-19.
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Credit Ratings
On October 7, 2015, Ujjivan received an in-principle approval from the RBI to set up a Small
Finance Bank and floated its wholly owned subsidiary ‘Ujjivan Small Finance Bank Limited’.
The Company transferred its business to Ujjivan Small Finance Bank which subsequent to the
RBI licence commenced its banking operations from February 01, 2017. The small finance
bank status provided the opportunity to expand Ujjivan's range of loan products, and also to
accept deposits rather than relying on other financial institutions to provide funds for the
loans. Currently, Ujjivan SFB provides a range of products and services such as savings
account, current account, fixed deposits (FD), recurring deposits (RD), Micro Loans, Home
Loans & Small Business Loans. The bank also offers internet banking, phone banking and
mobile banking facilities to customers. Ujjivan SFB ATM is biometric enabled, thereby
enabling customers to withdraw money through biometric authentication. Customers can
open their bank account in 5–7 minutes on a hand-held device through Aadhaar enabled KYC.
The bank has introduced Senior Citizen Product and Tax Saver Fixed Deposit.
Subsequent to the transfer of business, as mandated by the RBI, Ujjivan Financial Services
Limited got itself registered as a Core Investment Company (NBFC-NDSI-CIC). Its main objects
are to carry on the business of making investments in group company(ies) in the form of
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securities and providing guarantees etc. and to carry on financial activities, whether in India
or outside, in the nature of investment in bank deposits, money market instruments
(including money market mutual funds and liquid mutual funds), government securities, and
to carry on such other activities as may be permitted and prescribed by the relevant statutory
authorities for core investment companies from time to time.
As a part of its on-going CSR initiatives, Ujjivan is partnered with Parinaam Foundation and
Piramal Foundation which undertakes the community development programs, educational
programs, financial literacy programs, free healthcare and clean drinking water facility across
many places in India. The project named “Chote Kadam – Coming Together for Good” has
reached out to more than 12 lakh beneficiaries across the country. Ujjivan and Parinaam staff
has come together with the community for the upliftment of the unserved and underserved.
The distribution of the projects taken by UFSL and Parinaam Foundation can be seen below:
The Company after deliberate discussion engaged in a partnership with Piramal Foundation
to execute the following two CSR projects for and on behalf of the Company:
1. Piramal Swasthya - In this project Piramal Foundation provides medical awareness and
medical facility especially in rural areas and their focus is on providing primary
healthcare facilities to rural people. They provide mobile health services based on
fixed day where Medical Vans with doctors & teams visit villages/ areas at regular
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intervals, conduct diagnostic and lab testing and test reports & give treatment in real
time.
2. Piramal Sarvajal - Piramal Sarvajal is a social initiative of the Piramal Foundation – was
established in 2008. Sarvajal has established real-time online monitoring of the
drinking water infrastructure which enables viability of distributed remote operations,
quality control and streamlined maintenance services.
1. Ujjivan small finance banks are geographically concentrated and hence are more
vulnerable to systemic risk (weather, crop prices, and regional economic performance) as
compared to large banks. Their local nature also makes them more prone to capture. This
could lead to persistent governance problems and owing to the higher exposure to risk,
they have to have to pay a higher rate to their depositors which in turn, might create the
need to make riskier loans resulting in a vicious cycle of rising non-performing assets.
2. This segment is largely doing financial services with the unorganised sector. Therefore
weaning this sector out from chit funds and moneylenders, and bringing them into the
banking sector is one of the other challenges.
3. The recent and foremost challenge was to combat the significant Impact that
demonetisation had left on the business growth. It faced a hard time recovering the loans
owing to the demonetisation drive.
4. SFBs are directed to extend 75 per cent of its Adjusted Net Bank Credit (ANBC) to the
sectors eligible for classification as priority sector lending (PSL) by RBI. The priority sector,
comprising of agriculture, small enterprises and low-income earners, intensifies the
vulnerability of these banks to local economy. This demands to maintain a minimum
capital adequacy ratio of 15 per cent of its risk weighted assets (RWAs) which is quite high.
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5. The initial challenge for the newly licensed Ujjivan small finance banks will be to adjust
their promoter’s contribution and foreign shareholding to comply with the RBI guidelines.
Many of the institutions have foreign shareholding as high as 90 per cent, and so they will
need to dilute this to 49 per cent. Some microfinance institutions like Equitas and Ujjivan
are releasing IPO for diluting this shareholding.
7. The institutional transformation will also require the induction of new and diversified
talent from the banking sector as well as training the existing staff to accustom them to
this new system of delivering services.
With the training of the existing staff to accustom them to this new system of
delivering services.
Further, by ensuring that all the mandatory compliance and regulatory requirements
are in place, it is making its operations efficient and effective.
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7. GROWTH DRIVERS
Knowledge of the customer segment
Due to operations in the non-formalized and under-served segments of the economy,
NBFCs have created a niche for themselves through a deep understanding of needs of
their customer segments and ensuring last-mile delivery of products and services.
Tailor-made product offerings
They focused on a limited line (or often mono-line set of products) to serve the target
customer segment. They are also adopting non-standard pricing models for product
lines, in-line with the customer profile and inherent risk of lending.
Foothold of NBFCs
They are now reaching out to Tier-2, Tier-3 and Tier-4 markets, distributing the loan
across several customer touch-points. Furthermore, they are also building a
connected channel experience, that provides an omni-channel, seamless experience
with 24/7 sales and service.
Adoption of technology within the system for improved efficiency and enhanced
experience
The use of technology is helping NBFC customise credit assessment models and
optimise business processes, thereby reducing the time to market and helping
improve customer experience
Multilateral lending arrangements
They have been tying up with multiple alternative lenders with digital platforms and
commercial banks as well, which has been adding to their targeted customer base
Sturdy risk management
Given their focus on lending to the sub-prime customer segment, and regulatory
disadvantage (SARFEASI, DRT and capital adequacy requirements) in comparison to
commercial bank lenders, they have ensured enhanced governance through a
proactive, robust and agile risk management model.
8. LIMITATIONS TO GROWTH DRIVERS
Leveraging an off-the-roll sales force with no direct ownership
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The absence of direct sales agents on NBFC payrolls has had a downward spiralling
effect on the quality of sourcing.Gaps in the underwriting model leading to decline in
asset quality
Gaps in the underwriting model leading to decline in asset quality
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Target Rural Affluent for deposits and word of mouth marketing, focus on deposits
from
panchayat & other government, private bodies
MSE
Introduction of new secured product variants
Partnership with leading online aggregators to develop multiple sourcing channels
Overdraft cross-sell campaigns on existing MSE and Current Account customers
Affordable Housing
Further deepening of market penetration
Thrust on semi and informal segment
Branch Banking
Product enhancement & ecosystem for Current Account
Salary account re-launched with revamped offerings
Privileged offerings based on Total Relationship Value
Leverage Bill Payment options, RuPay Offers, Mobile Banking Penetration & Loyalty
Programs
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