How This Small Finance Bank is Taking Big Entrepreneurial StepsEvery bank now has a vertical that caters to the needs of start-ups and SMEs but for Singh that was the focus from the beginning.

Starting up, more often than not, has been a way for people passionate about ideas to break away from the mundane system that restricts them. But while that's the common story, there are few who break away from the system, start up and make a comeback, only to disrupt the routine structure of what previously held them back. AndGovind Singh,MDand CEO, Utkarsh Small Finance Bankdid exactly that.

DIVERSIFICATION IS THE ONLY CONSTANT

With a background of banking, Singh decided to start a venture of his own, which led to the formation of the Utkarsh Micro Finance Institution. Thanks to his knowledge of the industry, it wasn't too long before he met with success. With a customer base of 1.2 million and from lending to SMEs, MSMEs and start-ups, it was time for them to grow again.

"When you are into financial services, you need to diversify. A monoproduct would bring in all sorts of challenges. After six years of successful business, we also needed to change the course. As RBI came up with the guidelines for small finance banks, it fit our thought process completely. With the focus on MSMEs, agriculture and start-ups - basically lower ticket size loans, we started Utkarsh Small Finance Bank," said Singh. The bank officially started functioning from January, 2017.

FOCUS ON START-UPS AND SMEs

Every bank now has a vertical that caters to the needs of start-ups and SMEs but for Singh that was the focus from the beginning. With two verticals - MSME housing and treasury options, their MSME program looks at loans for entrepreneurs whose business demands are growing at a high rate. "With ticket sizes ranging from Rs 50,000 to Rs 1 crore, most of our clients are entrepreneurs and small business owners. We have a separate department that interacts with these people. We support them not just through funding and banking, but also by conducting workshops and training," he said.

For Singh, change is about to set in, in the next 12 months. "We already have Rs 120 crores of deposit and by next year we will have Rs 2000 crores. Our asset value in the loan book is currently Rs 1800 crore but we are looking at bumping it up to Rs 3,500 crore," said Singh.

TRANSITIONING INTO A BANK

But, it wasn't all hunky dory for Singh. While demonetization certainly helped in increasing awareness, there were many challenges that they faced with the slow economy. "The requirements of being a bank are much higher. Risk compliance, legal and technology are the segments that require utmost focus. It took us 18 months to bring about the structure. One of the most critical aspects was the IT part - we required the core banking system to be on a digital platform.

Even the capital expenditure was high, so we outsourced the tech solutions. We started operations of the bank, while also running the micro-finance institution so it also involved training a lot of our earlier employees," he said. The bank is also one of the only ones to be headquartered in Varanasi. "The idea was that we got access to small and medium business owners, who at that time didn't have easy access to loans. Financial inclusion was poor in these areas. From there we now have spread to over 10 states," he said.

DIGITAL FIRST

When you are a bank in 2017, you cannot ignore the digital aspect. "We are in the final testing process and soon, we will be completely digital. It was all a part of the strategy and today, we are specialising in tab-based banking. Earlier, the process of launching a bank was difficult because everything was manual, but with the advent of the digital and tech piece, it's a whole lot easier. Even regulations wise, it's much better now," he said.

(This article was first published in the July issue of Entrepreneur Magazine. To subscribe, clickhere)