Credit for the poor has to be looked into as a business proposition, said J.M. Garg, chairman and managing director, Corporation Bank, who was speaking at the Mint Clarity Through Debate event on Inclusion: Key to Growth for Banking and Industry. Other speakers at the debate, who included K.V. Eapen, joint secretary, Union finance ministry; T.T. Srinivasaraghavan, managing director, Sundaram Finance Ltd; S.A. Bhat, chairman and managing director, Indian Overseas Bank; M.S. Sundara Rajan, chairman and managing director, Indian Bank; A. Vellayan, chairman-designate, Murugappa Group; Nachiket Mor, president, ICICI Foundation; and M.F. Farooqui, principal secretary, ministry of industries, Tamil Nadu government, also aired their views on this and other related issues. Mint presents the second part of edited excerpts from the discussion, held in Chennai on Monday and moderated by deputy managing editor Tamal Bandyopadhyay:
Garg, you told us that lending to the poor is a lucrative business one can do it. But why aren’t you doing it? What is the inhibiting factor?
Garg: I have stated earlier also that this is an area to be looked into as a business proposition. So, we have started creating that awareness among our staff members and I am sure we will be able to scale it up.
Now, the problem that we face is in terms of scalability of technology because, as Sundararajan was mentioning, we have in the six lakh plus villages about 30,000 branches. Reach and scalability - that will be one of the issues that we have to address. And, we are trying to do this through service providers like FINO, Integra, Little World, etc., and the problem is, to what extent can they serve the entire financial sector. We’ll have to scale it up and we’ll also have to develop new technologies. Maybe, we will have to migrate from the existing technologies to mobile banking and that would help us to reach out to the masses.
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60-70% of the people do not have a bank account, and we started this process (of financial inclusion) from 2005. Now, we’ve done a quick calculation (of the cost) of providing the same model of branchless banking, and what will be the total cost to the exchequer. They (the exchequer) have to provide it in the initial stage. It could come to roughly about Rs3,000 crore, not more than that. When we can waive agricultural loan to the extent of Rs60,000-70,000 crore, this is a very small amount. And, then, to maintain this in the initial period of 2-2.5 years to (achieve a) break-even, the cost cannot be again very high. It could be roughly Rs600-700 crore per annum. So, if this is the total cost which the country has to incur for financial inclusion, as a first step towards inclusive growth, I think that is where we should start.