Over the 120 years of its existence, the City Union Bank’s operating philosophy has been strictly to ‘stick to its knitting’. But now, it has decided to change tack, albeit slightly. 

Nearly 40 per cent of the bank’s ₹46,500-crore loan book is made of loans to MSMEs; another 18 per cent to agriculture. The bank has always stuck with its traditional clientele, mostly in its home State, Tamil Nadu, where it has 524 of its 800 branches in India (and 692 in South India). While nearly 60 per cent of its loan book comprises MSMEs and agriculture, the other 40 per cent is spread over a dozen other sectors, each accounting for a single digit percentage share.  

Its housing and personal loan portfolio together account for about 7 per cent. These too were only given almost entirely to its existing MSME and agri customers, whom the bank knew well. Such a gingerly approach to banking has stood it in good stead. CUB has been a safe bank, even if it did not grow explosively.  

The bank was recently in the news for making a net profit exceeding ₹1,000 crore for any year. But things are about to change a little. 

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With the help of Boston Consulting Group (BCG) to automate its processes — taking away personal judgment and discretion — the bank is slowly diffusing its portfolio into personal and home loans. BCG was engaged last year; the project is ending this month. 

The first products are still for MSMEs. For credit up to ₹3 crore, if the borrower gives access to his GST and income tax data and credit history, the desired loan could be credited to the borrower’s account within as short time as two hours. Soon, there will be products for similarly giving loans up to ₹5 crore and ₹7.5 crore. “With this, the maximum time taken for a credit decision will come down from three weeks to three days,” says Narayanan Kamakodi, the Managing Director and CEO of City Union Bank. “In more than half the cases, decision could be taken the same day.” 

In the last 3-4 months, loans worth ₹2,000 crore were disbursed through this platform, the chemical engineer-turned banker told businessline recently. 

Change of tack 

Now, the same facility is being rolled out for housing loans and loans against property.  Last week, it got its first customer for its ‘pre-approved’ loans. The bank has, for starters, identified 2,000 customers and sent them ‘pre-approved loan’ offers. If a customer fills in a form (accessible on a smartphone) and provides required details, bingo, the desired loan (up to ₹5 lakh) lands in his/her bank account.  

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The automation project cost the bank ₹60 crore, including the software from Newgen Software Technologies. It will cover MSME loans up to ₹7.5 crore, home loans, loans against property, unsecured personal loans and credit enhancement for existing customers. 

Alongside, the bank is also on to branch expansion. In the next three years, it will have 200 more branches, taking the total to 1,000. 

MSME health 

Asked how MSMEs were doing, Kamakodi observed that after demonetisation and GST, much of those MSMEs whose profits depended upon tax evasion disappeared. These may account for about 5 per cent of MSMEs. Now, the MSMEs are in better health, but are yet to begin capacity expansion, Kamakodi said. 

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