What is Unity Small Finance Bank – India’s truly Digital Bank

The fever of Digitalization is coming up very strongly in India. The beauty is that today most people are supporting and accepting digital transactions.

The fresh wave of the Digital Era has made many beautiful discoveries possible. The Finance sector is coming up with new ways to best use the digital world. We have gone from digital transactions to truly digital banks today.

Yes, it is true. India has welcomed its first truly digital bank, The Unity Small Finance Bank. Here are the full-fledged details about Unity Small Finance Bank.

What is Unity Small Finance Bank?

India’s truly Digital Bank is a joint venture of two popular financial bodies- Centrum and BharatPe.

Centrum has been an integrated financial services group in the business since 1997. They serve institutions and individuals with Investment Banking, Stock Broking, Wealth Management to HNIs and Family Offices, and Housing Finance in tier 2 & 3 cities.

BharatPe is a fintech company. It is the fastest growing company which started in the year 2018. It has provided India with the country’s first interoperable UPI QR Code. Today, it serves 80 lakh merchants across 150 cities in India.

The above two financial bodies have clubbed their aspirations to grow their businesses as a bank. The PMC bank crisis was an area of opportunity for the above financial bodies to join hands and bring India’s truly Digital Bank.

Centrum and BharatPe received in-principle approval from the Reserve Bank of India (RBI). The central bank’s approval led them to take over the assets and liabilities of PMC Bank.

What is the objective of Unity Small Finance Bank?

Centrum Group’s Chairman has mentioned that their aspiration with the Unity Small Finance Bank is to be India’s first Digital Bank.

Centrum and BharatPe plan to show the traditional lenders an opportunity to grow their digital infrastructure and increase the market’s requirements for digital products.

Since most small finance banks in India are collaborating with fintech companies to monetize, incorporating Unity Small Finance Bank is a step ahead of the collaborations.

Today, the buy-now-pay-later (BNPL) model is gaining popularity in India. In the BNPL and micro-lending models, the fintech companies like Paytm, Gpay, etc., are partnering with NBFCs to meet consumer needs.

What are the Products and Services of Unity Small Finance Bank?

The Unity Small Finance Bank deals in three major services; they are:

• MSME Loans:

The SFB will deal with customers in providing secured and unsecured loans to Micro, Small, and Medium businesses. The loans can be delivered as a growth capital, working capital, debt consolidation or purchase of assets.

• Micro Finance:

Micro Finance option is secured for the women entrepreneurs. They will provide business loans to women entrepreneurs exclusively. These loans will be disbursed under the Joint Liability Group (JLG) model.

The various loan structures under Micro Finance are

• Micro loans- Customers can avail loans upto Rs. 80,000/- for the period of 24 months.

• Micro Enterprise Loans- Micro, Small, and Medium Enterprise owners can avail loans upto Rs. 300000/- for a duration of 36 months.

• Aarogya Dhara (Wash Loans)- It is a village-specific loan for safe water and sanitation facilities in villages of India. The loan disbursed is upto Rs.30000/-.

• PM Svanidhi Loans- It is a Prime Minister scheme to street vendors who require financial assistance. The loans given are upto Rs.10000/-.

• Supply Chain Finance.

The supply chain finance is a customized solution for MSMEs and large corporates, credit to overcome working capital challenges of any stature. They offer credit across different things like Invoice Discounting, Receivable Finance, etc.

The loan structure in Supply Chain Finance Includes:

• Vendor Financing.
• Dealer Financing.
• Pre-shipment Finance.
• Post Shipment Finance.

Unity Small Finance Bank has a completely digital and automated system of financing which is completely transparent. They provide sustainable and reliable financing solutions to various small to medium size ventures.

What is the future of Unity Small Finance Bank?

In the current scenario, the cost of borrowing is less. But, there is a section of people in India who borrow small amounts from the market and they don’t mind taking loans at higher than market rates.

Such small and micro borrowers are not targeted by large financing institutions or private or state banks for loans. The micro section of people can be catered by the Unity Small Finance Bank with a digital approach.

The rate of deposit of the Unity Small Finance Bank will be higher because of their limitations with the customer acquisition. The higher rate of deposit will eventually impact the net interest margin. But, even after the above issues, the micro borrowers will be interested in taking the capital to use them to fulfill their needs.

The section that includes micro borrowers have become the most targeted section for the BNPL companies. India has emerging BNPL wallet systems like Simpl, Mobikwik, Ola Postpaid, Lazypay, etc., these are primarily e-commerce, grocery, and food delivery platforms. They have made payments so easy and accessible for people.

A prediction made by Goldman Sach reveals that BNPL will become the fastest growing online payment option in the future. Its market sharing has been predicted to grow from 3% to 9% by the year 2024.

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