Page 37 - Banking Finance February 2018

ARTICLE

soundness, proposed business plan, and fit and proper meetings are clearly a good place to source savings.
status, also reflected on the ability of the institutions Similarly, pigmy deposit has a lot of potential, which tries
to reach out to unserved and underserved segments. to capture surplus cash from households and businesses.
Also, licensee institutions cover a wide geographical This deposit scheme suits the needs of those having small
spread - Equitas, ESAF, Ujjivan and Janalakshnmi in the and irregular cash flows such as the poor who could be
south, Disha and Suryodya in the west, RGVN in the daily wage earners, traders, housewives, etc. The bank's
east, and Utkarsh in the north. Selection list indicates
roving authorised agents collect savings at clients'
that there is tremendous opportunities for these NBFC- doorsteps. Savers make deposits at regular intervals
MFIs to transformation in to small finance banks. according to their convenience. But because of the
2) The existing banking system does not offer a value Bank's staffs reluctance, the banks have not focusing
proposition for rural low-income segments. This on this. The Payment Banks and Small Banks can play
obviously presents an opportunity for SFBs to leverage a leading role to fill the gap.
savings that are stored under a mattress and locked 4) NBFC-MFIs in India are based on a business model
into informal savings clubs/similar mechanisms. SFB also
driven by credit. NBFC-MFIs are already known for its
has the advantage over Payments bank as they can
micro credit lending. With the existing credit base and
lend to unserved and underserved sections including proper risk management systems , restructuring of
small business units, small and marginal farmers, micro credit model , NBFC-MFIs turned SFBs can build further
and small industries and unorganised sector entities.
and expand credit lending. As per the Fourth Census
There is vast scope to make and expand presence in of MSME sector, 5.18% of the units had availed of
unbanked villages with a population up to 9,999. Of the finance through institutional sources, 2.05% had finance
597,608 villages in India, 592,927 have population up from non-institutional sources and the majority of units
to 9,999. Of these, 268,454 villages (with a population i.e. 92.77%, had no finance or depended on self-finance.
greater than 2,000 persons) have theoretically been According to International Finance Corporation (IFC),
covered under financial inclusion plan of the Micro and Small Enterprise (MSE) sector faces severe
government and have branches (regular or ultra-small),
financing shortage with debt shortfall of Rs 26 trillion.
or business correspondents and their agents. The actual lending by all Scheduled Commercial Banks
This leaves 324,473 villages outside the formal finance to MSEs as of March 2015 is 9.66 trillion and though
landscape and with suitable products, credible there is huge lending potential is untapped due to one
marketing and a strong distribution channel, rural or other reasons, the lending to MSE sector always
markets do indeed have huge potential. NBFC-MFIs shows increasing trend (Graph-3).
turned SFBs have significantly higher outreach in these
areas than the banks. Through few tactics i.e designing Graph-3
and marketing of long-term, illiquid savings products
during the harvest season and provision of highly liquid
savings accounts during planting/weeding seasons, SFBs
can penetrate deeply in the rural markets. The role
of MFIs is significant in providing 'the last mile'
banking services to the unbanked people by deploying
over 0.195 million Business Correspondents / Customer
Service Points (BC/CSPs). Therefore ,MFI turned SFBs
will not only occupy the banking space , but also
exhort commercial banks for efficient services.
3) As convenience is the key to attracting savings, SFBs
can create convenient avenues/touch points to trigger
customers to save regularly. Fortnight/monthly group

BANKING FINANCE | FEBRUARY | 2018 | 37

Sashi Publications Pvt Ltd Call 8443808873/ 8232083010