Sa-Dhan Newsletter Volume 5 Issue 2

Operational Costs of Delivering Microfinance : Banker's Perspectives

Oriental Bank Grameen Project

- Ravinder Yadav

Introduction

implemented since it had the support of the bank's top

management.

O

riental Bank of Commerce (OBC) was established on

19th February 1943 as a private sector bank in

Another reason that prompted the bank to embark upon

undivided India at Lahore (now in Pakistan). Later, it was

its own mF programme was the disturbing performance of

nationalised on 15th April 1980, along with five other banks,

mandatory poverty alleviation programmes. The beneficiaries

when it had a network of 307 branches and had total

were becoming disgruntled rogue debtors. The bank thought

business of Rs. 436 crore. Since then, the bank has been

that this mandate could be fulfilled better, more systematically

growing at a rapid pace. In fact, OBC has been registering

and efficiently, without undermining financial discipline of

business growth ahead of the industry average, in India,

the bank. At the same time, it could be utilised to benefit

for the last many years. By the end of March 2004, the

the target population. The whole idea to start the pilot was

bank's network had increased to 1171 offices and total

to see and prove that the poor are bankable as experienced

business to Rs. 56,286 crore.

by others abroad.

The bank has intrinsic strength based on high capital

The implementation started on pilot basis in 1995 in eight

adequacy ratio of 14%. It is the first bank in India to achieve

villages of Dehradun district (Uttaranchal) and Hanumangarh

zero net non-performing assets (NPAs). It has the highest

district (Rajasthan) through two branches of the bank.

per employee productivity (Rs 4.16 crore) and highest

While Dehradun is a valley in the Himalayan range,

operating profit per employee (Rs 11.27 Lakh) amongst the

Hanumangarh is a part of Thar desert in north-east

public sector banks in the country. The government partially

Rajasthan. Both pockets are traditionally backward in terms

off-loaded its equity holding to public in 1994. Government

of agriculture and industrial development.

now holds 66% equity. OBC has highest level of safety

having obtained P1+ rating for its certificate of deposits and

Project Profile

'FAAA' rating for fixed deposit programme.

By the end of first year (1995-96), 84 groups of five

Inception of Micro finance

persons each were formed. Emboldened by the success of

the pilot project, the bank expanded the geographical

The micro-finance (mF) programme in OBC is called the

coverage of the project through 32 branches. During the

Oriental Bank Grameen Project (OBGP). It was launched in

intervening nine years, up to March 2004, the project was

May 1995 with objectives to provide banking services to

expanded to 189 villages and the number of groups had

the poor at their doorsteps, inculcate thrift, provide

increased to 2,471. The cumulative savings rose to Rs 3.35

uninterrupted credit facilities in multiple doses including

crore. The advances to the groups grew to Rs 13.95 crore.

credit for creating enabling working environment

The recovery has been 100%. The following table shows

encompassing health, housing and indebtedness, arrange

the progress of the project over the years since the

trainings to sharpen skills, educate on family welfare habits

inception of the programme.

like literacy, family planning, use of safe drinking water,

plantation, sanitation, removal of social evils and promote

Year

1995-96 2003-04

social assimilation, arrange backward and forward linkages,

No. of implementing bank branches

2

32

and, above all, enable them to take decisions independently

No. of villages covered

17

189

and manage their own financial and social affairs.

No. of groups

84

2,471

The OBGP was born out of the worldwide experiments in

No. of loan clients

420

12,203

ameliorating the lot of poor. It hinges on active participation

Amount advanced (in Rs crore)

1.5

13.95

of people through groups. Each group consists of five

Savings mobilised (in Rs crore)

0.1

3.35

members with homogenous socio-economic background.

Preference is given to poor women. As a matter of fact,

Though the magnitude in relation to the total business of

any unique project has its origin in the mind of an individual

the bank may be minuscule, yet its ramification for the bank

or a core group. In the case of OBGP too, it was the idea

and the banking industry as a whole are far reaching. The

of one visionary in the top management of the bank and

project has clearly shown that the poor are bankable and

was aptly realised by the core team. The idea could be

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