New Delhi: Hariyali Kissan Bazaar, the rural retail arm of Delhi-based DCM Shriram Consolidated Ltd, has allied with HDFC Bank, India’s third largest bank, to offer full-fledged banking services to its customers in an effort to offer them access to banking and finance products.
The move will help HDFC Bank increase its reach in rural areas, an articulated objective of the government under its financial inclusion initiative.
Hariyali Kissan Bazaar will offer normal banking services such as a savings account facility and loans to its customers, mostly farmers, through its 128 outlets. It plans to set up counters in all retail outlets, manned by two employees belonging to Hariyali Kissan Bazaar, but the branding would be that of the bank.
“This (banking services) will take the bank to the doorstep of rural customers who most often don’t get credit when they need it,” said Ajay S. Shriram, chairman and senior managing director of DCM Shriram Consolidated. The Reserve Bank of India allows banks to employ what it calls “business facilitators” and “correspondents”, as part of the initiative to bring more people under the banking system. Correspondents are those who seek deposits, while business facilitators organize lending.
Apart from providing capital, HDFC Bank has to take credit risk, or the risk of defaults on lending. Hariyali Kissan Bazaar will earn commissions and fees for the services it provides, such as collecting deposits and loan repayments.
The deposit and lending rates offered in Hariyali would be same as what HDFC Bank offers its direct customers, but DCM officials say their focus will be on timely delivery of credit to farmers. Executives at HDFC Bank could not be reached over the weekend.
In the recent Budget, the finance minister announced a Rs60,000 crore debt relief package to small farmers who couldn’t repay loans. The government is encouraging agricultural credit in an effort to accelerate growth in the sector. DCM Shriram claims that Hariyali outlets now reach around two million farming families, and plans to add 300 outlets by March 2009. Each outlet caters to between 15,000 and 20,000 farmers.
Hariyali, which means “greenery”, started out as a farmers market but now has converted itself into a full-fledged retail store with more than 12,000 products on display—ranging from fertilizers to consumer durables.
DCM also plans to spin off the retail division as a separate company and, thereafter, attract private equity funding for expansion. “Hariyali would be able to offer Esops (employee stock option plans) and (allow) greater management focus,” said Shriram, who declined to comment on a possible time frame for this.