I won't be at town for a while, so no blogging this week. So thought of posting this one article published in Business standard. If you remember, I had published an article on Financial Inclusion in one of my earlier blogs (Why be excluded?). Well, banks in India seem to be taking steps towards this direction. Lots of MFI's (Micro Finance Institutions) exist in the market but because of the meagre portfolio they can afford, banks seem to be interested in taking a piece of the pie.
Already, banks like Yes Bank are entering into the foray, with a pilot plant set up in Mumbai. Its Micro Finance wing Sampann, has started operations in 3 areas of Mumbai. It has adopted the strategy of giving loans to individuals directly, instead of Groups of Individuals, as is the case of Grameen Bank.
All said & done, the only limiting factor on banks is that they can keep a variable uinterest rate as long as RBI doesnt put any cap on the interest rate, as explained by Sitaram Rao, consultant to SKS, a micro finance institution.
Frequent defaults could also cause banks unable to keep up with the rest of the business. Alltogether, it also seems as a strategy by banks to offer customers free accounts for taking the facility. The banks anyway gain here, because the risk of default, if nil can earn the bank considerable profit. As I mentioned in one of my blogs on the Inverted Curve. During such a period, banks provide loans for a high interest rate for short periods. This helps the banks in earning huge profits in no time.
Only time will tell how the plan goes. Financial inclusion Zindabaad!!!
Already, banks like Yes Bank are entering into the foray, with a pilot plant set up in Mumbai. Its Micro Finance wing Sampann, has started operations in 3 areas of Mumbai. It has adopted the strategy of giving loans to individuals directly, instead of Groups of Individuals, as is the case of Grameen Bank.
All said & done, the only limiting factor on banks is that they can keep a variable uinterest rate as long as RBI doesnt put any cap on the interest rate, as explained by Sitaram Rao, consultant to SKS, a micro finance institution.
Frequent defaults could also cause banks unable to keep up with the rest of the business. Alltogether, it also seems as a strategy by banks to offer customers free accounts for taking the facility. The banks anyway gain here, because the risk of default, if nil can earn the bank considerable profit. As I mentioned in one of my blogs on the Inverted Curve. During such a period, banks provide loans for a high interest rate for short periods. This helps the banks in earning huge profits in no time.
Only time will tell how the plan goes. Financial inclusion Zindabaad!!!
Financial Inclusion or illusion? Mere bank accounts will not be enough to feed the poor. Good one. And good luck with the trip.
ReplyDeleteHi Unni.. where is your next post?
ReplyDeleteUnni.. next post ...
ReplyDeleteGreat informative post! Also,all the comments are seem very nice for us.we’re all eagerly waiting for your next post.Thanks.
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Unni next post? Where r u now?
ReplyDeleteHi Vamshi.... First of all...sorry for not responding and thanks for sticking around and motivating me to post. Havent been to blogging for a long time since I got a job. Will try and keep up....
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