Don’t miss the latest developments in business and finance.

ICICI expects rural spread to up profits

Image
Bloomberg Mumbai
Last Updated : Feb 05 2013 | 12:35 AM IST
ICICI Bank expects its rural exposure to begin adding to profits in as early as 18 months, said K V Kamath, chief executive.
 
The bank aims to increase the contribution of borrowers from the countryside to as much as 25 per cent of total loans within two years as the government increases its focus on the rural economy to help boost agricultural output, he said. Loans during the three months to December 31 grew 42 per cent to an outstanding Rs 1.8 trillion ($40.3 billion).
 
"The focus the government has given to agriculture and the rural economy, fits into what we have been trying to do,'' Kamath said.
 
"We think the strategy we articulated will take 18 to 24 months to scale up. Eighteen to 24 months normally is a long period for us in context of other domains, but in rural India we need to be patient because of the sheer challenge.''
 
The government wants to increase agricultural growth to expand GDP at a faster pace and help its 234 million farmers.Finance Minister P Chidambaram in the annual budget increased the allocation of bank loans for the farmers to Rs 2.3 trillion in the year beginning April 1, from Rs 1.7 trillion.
 
In India's countryside, about 58 percent of farming households and 70 per cent of non-farming households still lack access to basic banking services, Chidambaram said in November.
 
"Banks can help in creating productive assets in the rural areas and also tap the tremendous potential,'' said Rupa Rege Nitsure, chief economist at state-run Bank of Baroda in Mumbai.
 
India's $854 billion economy is poised to expand at 9 per cent in the year ending March 31, for a second successive year. The government aims for 10 per cent growth in each of the next five years, Chidambaram said.
 
Price pressures: Slower agricultural growth has also put pressure on the price of staple foods in a nation of 1.1 billion people. Farm output increased 1.5 per cent in the quarter to December 31, the government said, slowing from 1.7 percent in the second quarter and 3.4 per cent in the previous three months.
 
Every seven of 10 Indian live in the rural areas and a rise in their incomes will help India's economy expand faster, Chidambaram said. India has about 65,000 bank branches, or one for every 10 villages, according to central bank data.
 
ICICI Bank is working on getting an `appropriate technology' to reach to the more than 600,000 villages across the nation, Kamath said.
 
"We have started recruiting for the rural strategy and we have technology that is appropriate for the rural India,'' said Kamath. "We have taken early steps to move into the rural economy.''
 
The bank plans to use branches, franchises, telephone kiosks and automated teller machines to lift its rural customer base eightfold, said Chanda Kochhar deputy managing director in November.
 
ICICI aims to screen borrowers and approve loans of as little as $100 at sites located every 10 kilometers (6 miles) across India, she said.
 
Shares of ICICI Bank, which gained 38 per cent over the past 12 months, traded 3.3 per cent or Rs 27.2 higher at Rs 847.9 on the Bombay Stock Exchange.

 

Also Read

First Published: Mar 07 2007 | 12:00 AM IST

Next Story