Bankers are increasingly becoming good samaritans. They may play golf, guzzle tall glasses of beer and pore over balance sheet numbers, but some of them -- UTI Bank, Citibank, HDFC Bank, ABN Amro, to name a few -- are now looking at greater community participation by helping the underprivileged section of the society.
UTI Bank recently provided a financial guarantee of Rs 6.5 crore to the Society for the Promotion of Area Resource Centres (Sparc). Citibank is working on projects for the uplift of women while HDFC Bank has launched a payment gateway for the Cancer Patients Aid Association (CPAA).
In the meantime, ABN Amro is lending a helping hand to Support, a non-governmental organisation (NGO) which is into rehabilitation of drug addict street children.
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UTI Bank's guarantee was divided into two parts -- an advance payment guarantee of Rs 4.3 crore and a performance guarantee of Rs 2.15 crore. Through the advance payment guarantee, which is 10 per cent of the contract size, Sparc will be able to start the project and pay back the money as and when the bills are raised. The performance guarantee is valid for 33 month and ensures that the project will be completed within 24 month.
The guarantee was given to build 320 toilet blocks in around 20 wards in Mumbai. This is a pilot project, awarded by the Bombay Municipal Corporation for the first of a plan to build a total of 1,500 toilet blocks across the city, says Sparc director Sheel Patel.
"UTI Bank has charged 1.5 per cent as guarantee commission which the bank charges from top corporates too," says UTI Bank's manager (credit) PR Anil Kumar. The total project cost is around Rs 43 crore.
In the last two years, Sparc has completed projects worth around Rs 32 crore, including a similar sanitation project in Pune and construction of transit homes in Mumbai.
Citibank's community support programme in the country was launched four years ago, in 1997, to focus on micro-credit organisations to empower underprivileged urban women through income generation. The bank has partnered Sparc in Mumbai, Friends of Women's World Banking in Ahmedabad, Working Women's Forum in Chennai, Sasha in Calcutta and Sharan in New Delhi.
It has structured a crossborder financial partnership for Sparc's community housing project in Mumbai. This was a project finance transaction of Rs 3.5 crore with a lien on the saleable area of the project and partly against a cash collateral.
Homeless International, a London-based NGO, will provide a part guarantee of about 30 per cent to Citibank in the country.
HDFC Bank's payment gateway for CPAA will help donors send their contributions to cancer patients online through a secure payment gateway.
ABN Amro employees across all branches contribute a small sum every month from their salary to Support. The project took off early this year. The bank contributes an amount equal to that of all the employees' contributions. Support runs a rehabilitation centre for drug addict street children at Vakola, Santacruz in Mumbai. It currently has around 120 children at the centre.
The major problem which banks face when dealing with the NGOs is that these organisations don't have a corporate structure. Most NGOs are dependent on government grants or donations from corporates or individuals. "NGOs have an informal work culture and most of them do not have any structured set-up. Moreover, if NGOs default, the banks do not have any thing to fall back on," says UTI Bank's Kumar.
An escrow account was opened with the UTI Bank for the Sparc project where all the money, including the advance and all other payments, will be credited. "The money will not be utilised for any other purpose. The entity will also have to submit a progress report every month," says Kumar.
Why have the bankers gone beyond the ledger book and taken the unconventional path? Well, the answer seems to be social consciousness. "At the end of the day, you have some responsibility towards the society. We are a citizen first and then a banker," quips one senior executive with a new private sector bank.