Understanding The Finance Industry in Rural India

Finance Presence in Rural India

Finance Presence in Rural India

Finance presence in Rural areas today; is in the following forms: Nationalized Banks Private Banks Credit Societies Co-operative Banks Informal loans (Money Lenders)

Rural Finance Penetration in India

Regional Rural Banks and Co-operative Banks form approximately 66% by presence in count although they account only 5.6% of the total business

The above reflects that even though the finance institutions are present to a certain extent in Rural areas; perhaps due to lack of awareness & basic financial literacy, the institutions are not deriving the optimum business, despite the high potential.

Rural Finance Branch/offices Network

As per the D&B research in 2009-10; of all private sector branches, 13% are in Rural India Branch network of Scheduled commercial banks is 40% in Rural India; of the total SCB branches

Finance Presence Geographic Segmentations

Reserve Bank of India

Public Sector Banks (28)

Rural Semi Urban Urban Metro

RRBs (88) LABs (4)

11498
2612

Private Banks (22)

1052
2468

Foreign Banks (30)

0
2

Total

19275
12776

31825
17858 14497

11336 10501

607 63

2504 2245

50 227

13306

Total

53908

14780

8269

279

77236

Besides, there are cooperative banks with more than 12000 branches & over 1 lakh primary credit societies linked with cooperative banks The above numbers are only indicative of the overall finance presence region wise - but do not show current picture
*As in 2005

Rural Finance Growth & Potential

Rural Finance Potential

As per a research conducted by RBI in 2009-10, 59% of the adult population in the country has bank accounts and 41% dont In Rural areas, the coverage of banks is 39% against 60% in Urban areas There is only one bank for a population of 13,000 Commercial bank branches cover only 7% of the Rural sector. The large market is still untapped Estimated demand for credit in rural India is Rs. 1,33,000 Cr. The banking system issued 87.83 million KCCs as on November 30, 2009

Rural Finance Growth Growth in Mobile Banking Subscribers

Population with Bank

Mobile Subscriber Base Registered M-Banking Customers Active M-Banking Customers

Units (Millions)

Framework of Mobile Banking

Indias Mobile Phone user base, as on 2009-10, consists of 347 million users, including 73 million Rural users As per one of the surveys, by 2012 - mobile banking active user base to reach 2% up from the current 0.2% Mobile-linked no-frills bank accounts are created for rural inhabitants in India

Rural Consumer Finance Preferences

Finance Preference in a Rural Household

The financial inclusion in a Rural Household usually follows this preference order: Savings Account Fixed Deposit Agriculture Credit Insurance Auto Loan Mutual Funds Savings & Fixed Deposits are highly preferred - which is the most trusted saving source in Rural Agri Credit & Insurance are amongst their most important need Auto Loan is a luxury requirement Mutual Fund Investment is only when all the above have been secured & they feel financially stable Therefore for most Rural Households, its a journey from needs to luxury

Rural Finance Preference Breakup

As per a survey conduced by PHDCCI in December 2010, more than 37% of the people in Rural India showed preference in Fixed Deposits investment

37%

15% 9%

14%

17%

6% 2%

PHDCCI, December 2010

Rural Finance Disbursement Trends

2 Peak seasons are observed The peak season is March; which may be because banks increase the loan disbursement towards the end of the year to meet their specific target The other peak time observed is in the period between July and September. Most agricultural activities seem to flourish during the monsoon season, which is usually July to September. These bank branches may be helping farmers meet their demand for finance

IFMR collected month wise loan disbursement data from 20 bank branches out of which : 12 RRB branches - Andhra Pradesh Grameen Vikas Bank, Andhra Pragati Grameena Bank 8 Commercial Bank branches - State Bank of Hyderabad, State Bank of India, Andhra Bank, Canara Bank, Syndicate Bank, Central Bank of India
IFMR Survey, 2011

Rural Finance Agency wise & Region wise Penetration

Rural Finance Agency wise Disbursement Break up

Name of Agency

Loan Disbursed by banks/FI to MFI during the year (Amount Rs. Lakhs)

No. of Micro Finance Institutions (MFIs)

Commercial Banks RRB Cooperative Banks SIDBI Total

803860.64 2413.61 266575.10 1072849.35

645 46 88 779

* The actual number of MFIs would be less as some MFIs have availed loan from more than one bank

Rural Finance Region wise & Agency wise Disbursement Break up

(Amount in Rs. Lakhs)

Commercial Banks Region Northern Region North Eastern Region Eastern Region Central Region Western Region Southern Region

RRB Banks

Cooperative Banks

Total

No. of SHGs Loan Amount No. of SHGs Loan Amount No. of SHGs Loan Amount No. of SHGs Loan Amount 15076 16652 156918 34108 67304 687463 15482.63 12537.25 85155.62 28638.02 36802.6 799402.43 11070 21365 77573 37713 19876 209200 7936.94 11215.22 53962.25 30201.9 4513.5 225490.25 11229 11290 42955 6025 61950 99055 7213.76 4964.52 14900.78 4369.96 23381.44 79161.29 37375 49307 277446 77846 149130 995718 30633.33 28716.99 154018.65 63209.88 64697.54 1104053.97

Total

977521

978018.55

376797

333320.06

232504

133991.75 1586822 1445330.36

Unlike common belief, the Southern region dominates with maximum amount of loan disbursed by commercial banks , followed by Eastern region North Eastern region has minimum loan disbursed by commercial banks

Rural Finance Trend in Disbursement MFIs & SHG Bank Linkage

Loan Disbursements in MFIs is higher as compared to SHG-bank linkage. Overall the trend reflects the increasing loan demands & disbursements in rural India

Some of the Renowned Micro Finance Institutions

Uttar Pradesh

Tamil Nadu

Kerala

Assam

Cashpor Micro Credit (CMC) Sonata Finance

Grama Vidiyal Micro Equitas Micro Finance Sarvodaya Nano Finance

ESAF Microfinance & Investments Pvt. Ltd (EMFIL) Gandhi Smaraka Grama Seva Kendram

Rashtriya Gramin Vikas Nidhi ASOMI

Orissa

Andhra Pradesh

West Bengal

Karnataka

Gram Utthan

SKS Microfinance Ltd (SKSMPL) Spandana Sphoorty Financial Ltd (SSFL) Asmitha Microfin Ltd (AML)

Bandhan Financial Sahara Uttarayan

Shri Kshetra Dharmasthala,Rural Development Project (SKDRDP) BSS Microfinance Grameen Financial Services

Initiatives in Rural Finance

Initiatives in Rural Finance

HDFC HDFC Bank has targeted mandis to expand rural reach by opening additional branches It has tied up with the Postal Department to explore the vast network potential of the latter HDFC is also offering loans at reasonable rates to rural people

ICICI Bank ICICI Bank has increased its focus further on rural and semi urban areas by providing customized financial support to farmers, traders, commission agents, small processors etc. After its tie-up with Bank of Rajasthan, it has increased its reach in rural as BoR has a total of 463 branches 40% are located in rural and semi-urban areas ICICI also has tie dup with NGO's and other community-based societies in order to train and equip them to deliver products and has already transformed hundreds of them into Micro-Finance Institutions (MFIs) Has set up a model in which channel partners are appointed at different franchisees and kiosks Channel partners are the local people who provide banking services which are usually obtained in regular branches They operate like a full-fledged bank and are available in small centers, sharing profits and losses with ICICI
RBI

Project Financial Literacy : includes financial education to the rural people through various mediums. These include films, games, cartoons etc. which could appeal to the rural audience. Its main objective is to spread financial information about the central bank and general banking concepts to target groups such as women, self help groups etc.

SBI

Instead of spending too much on setting up office s, the firm minimized the documents required for loan provisions; like - no income statement provision is required for loan processing

Future Trends

As per the World Bank Report, it is estimated that in next 5 years, 65% of the Rural people will have excess to MFIs. Many Pvt. Banks and Foreign Banks would enter this business segment, because of very low NPAs. It is estimated that 5 % of the people below the poverty line will get reduced in the next 5 years

Thank You