ICICI Bank eyes rural India
, August, 08 2006 -
ICICI Bank is betting on rural India in a big way. The bank plans to adopt an agressive strategy to expand its branches in the main agricultural centres and increase its rural asset base beyond the current level of Rs 18,000 crore.
Elaborating on the banks plan, Mr K V Kamath, MD and CEO, ICICI Bank said: “When we had started moving into the consumer care business, the business probably had an annual market of about Rs 30,000-Rs 40,000 crore. This business has grown to over Rs 200,000 crore now. In the past few years, it has grown at the rate of 30 to 40 per cent. ”
Even as the Reserve Bank of India (RBI) plans to integrate the village money lenders into the rural credit structure to extend the reach of cheaper finance, the country's biggest private sector bank is planning an aggressive rural outreach plan. Technology will now play a larger role in ICICI Bank's rural banking plans. The bank is targetting at least a 10% rise in loans to the rural sector. However, what is interesting is the fact that it comes even as ICICI Bank is seen at the forefront of the thrust on microfinance. So the moot question is, why this shift in focus?
Mr K V Kamath, MD and CEO, ICICI Bank said: “It is our strategy that we don't want to lend just because there is an 18-per cent restriction. We are saying we want to lend because we see an opportunity. There is also a new set of intermediaries that we want to really promote, which is micro credit institutions. We believe that to reach 600 districts, we need about 200 micro credit institutions of a sufficient size to branch out into three districts each.”
The bank's rural asset base is worth around Rs 18,000 crore and is expected to grow further. ICICI Bank is looking at expanding its rural delivery channels through branches at major agriculture centres and is looking at partnerships with around 200 micro finance institutions (MFIs). In fact, the bank disbursed around Rs 2,500 crore to over three million customers through micro finance institutions in 2005-06.
Growing realisation of the urgency to drastically improve the competitiveness of India's farm and rural sector is leading to a search for a new approach to address the problem. It does appear that while the government will seek higher participation from the public sector banks to resolve the issue, private banks will look at the rural sector as yet another "sunrise" sector to lend to.