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Sa-Dhan Newsletter Volume 5 Issue 2
Operational Costs of Delivering Microfinance : Banker's Perspectives
The programme of micro finance has been making rapid
got such loans in 2002-03. Loans disbursed in 2003-04
strides. By March 2004, 10.8 Iakh SHGs were linked with
amounted to Rs. 1,855 crore as compared with 1,022 crore
banks. Around 90 per cent of these SHGs are exclusively
disbursed in 2002-03 NABARD extended cumulative refi-
formed by women. Cumulative assistance extended by over
nance support amounting to Rs.2,125 crore to these banks.
30,000 branches of 504 banks that participated in the
The programme has been recognised as the largest and
programme amounted to Rs.3,904 crore by March 31,
fastest growing micro-finance programme in the world. An
2004. During the year 2003-04, 3.62 lakh new SHGs were
impact assessment study conducted by the NABARD in
extended loans by banks up from 2.56 Iakh new SHGs that
2000 revealed that there was a marked improvement in the
Table: Progress of SHGs Bank Linkage asset base and income and employment levels of
households covered under micro finance.
Total SHGs Financed
Bank Loan (Rs. Crore)
Year
During the Year
During the Year
Amount (Rs.)
% Growth
Cumulative
Amount (Rs.)
% Growth
Cumulative
1992-99
32,995
32,995
57.1
57.1
1999-00
81,780
148
114,775
135.9
138
193.0
2000-01
149,050
82
263,825
287.9
112
480.9
2001-02
197,653
33
461,478
545.5
89
1,026.3
2002-03
255,882
29
717,360
1,022.4
87
2,048.7
2003-04
361,731
41
107,9091
1,855.5
81
3,904.2
Despite the rapid progress of micro finance, there are two
interest rates offered by NBFCs on deposits. With a view
main areas of concern. The first concern relates to the
to aligning the interest offered by the NBFCs with those
limited coverage of poor families. Out of the 52 million poor
prevailing in the banking sector, RBI reduced the maximum
families, only 16 million poor families (30.8 per cent) were
rate that could be offered by the NBFCs from 12.5 per cent
covered under the programme by March 31, 2004. The
per annum to 11.0 per cent per annum with effect from
second area of concern is the uneven spread of the
March 4, 2003. As per the RBI directive, rates offered by
programme. Andhra Pradesh accounted for 39 per cent of
NBFCs on NRI deposits cannot exceed those prescribed for
the total SHGs linked to credit, followed by Tamil Nadu,
SCBs. Effective April 24, 2004 NBFCs cannot accept fresh
Karnataka and Uttar Pradesh. At end March 2003, these
NRl deposits but can renew the existing NRI deposits.
four States accounted for 69 per cent of total SHGs linked
As on March 31, 2003 there were 13,831 NBFCs registered
to credit. To address these concerns, NABARD has inten-
with the Reserve Bank. Out of these, 730 were deposit
sified its efforts to scale up the programme in the States
accepting NBFCs. Total outstanding public deposits of 872
of Assam, Bihar, Chattisgarh, Jharkhand, Madhya Pradesh,
reporting NBFCs (including Miscellaneous Non-Banking
Orissa, Rajasthan, Uttar Pradesh and West Bengal, which
Companies (MNBCs), Mutual Benefit Financial Companies
account for the bulk of the poor. In addition, special efforts
(MBFCs) and Mutual Benefit Companies (MBCs)] amounted
are being made to popularise the programme in North-
to Rs. 20,098 crore at the end of March, 2003 as compared
Eastern and hilly States. NABARD had reduced interest rate
with outstanding deposits of Rs. 18,822 crore held by 910
on refinance to 6 per cent per annum for loans up to Rs.
reporting NBFCs a year a go.
50,000 per member to incentivise the banking system to
step up credit flow to SHGs. Table 3.10 presents the
Residuary Non-Banking Companies (RNBCs) accounted for
progress of SHGs and bank linkage.
74.9 per cent of total deposits held by NBFCs at the end
of March 2003. Of the 872 reporting NBFCs, 40 NBFCs had
Non-banking financial companies (NBFCs)
CRAR of less than 12 per cent. Over three-fourth NBFCs
Non-banking financial entities comprise NBFCs, mutual
had CRAR of more than 30 per cent as at end of March
benefit financial companies (Nidhi companies), and mutual
2003. Aggregate assets of deposit taking NBFCs as on
benefit companies (potential Nidhi companies). All these
March 31, 2003, declined to Rs. 47,777 crore from Rs.
entities were being regulated by the RBI till September 29,
52,049 crore as on March 31, 2002. However, the aggregate
2003. From September, 2003, Department of Company
assets have marginally increased to Rs. 49,034 crore as
Affairs had taken over the regulation of mutual benefit
on September 30, 2003.
financial companies and mutual benefit companies, leaving
the regulation of NBFCs with the RBI. Over the years, the
The ratio of gross NPA to total assets declined from 10.6
RBI has strengthened the supervisory framework for NBFCs.
per cent at the end of March 2002 to 9.2 per cent at the
The RBI's regulatory framework for NBFCs, though similar
end of March 2003. The net NPAs also declined from 3.9
to that of SCBs to a large extent, differs in a number of
per cent to 1.8 per cent during the same period. NBFCs
areas to account for the unique features of NBFCs.
registered a net profit of Rs. 339 crore in 2002-03
compared with a net loss of Rs. 212 crore in 2001-02
The regulations are relatively more stringent in the case of
mainly on account of reduction in financial cost.
deposit-accepting companies. There is a ceiling on the
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