DCB to ramp up microfinance

The Aga Khan Fund for Economic Development-promoted Development Credit Bank (DCB) is all set to go rural after achieving the priority sector lending target in 2007-08.

The Mumbai-based small private bank has been falling short of the requirement of having to lend 40 per cent of their total advances to priority sectors which include agriculture and home loans.

DCB is also seeking help from its promoter Akfed, which is active in microfinance space worldwide. The Aga Khan Association for Microfinance (AKAM) is the nodal agency though which Akfed routes its microfinance activities. AKAM will provide the bank a technology platform to set up the microfinance business.

``We see huge potential in the microfinance business. There is an opportunity to attract both savings and market insurance products in the rural centres which we can do through the microfinance institutions,'' said Kartik Mehta, head, microfinance business, DCB. AKFED led organisations like the Aga Khan Development Network (AKDN) and Aga Khan Rural Support Program (AKRSP) is involved in microfinance activity in the western region of Maharashtra. The bank is loking forward to cash in on these organisations expertise to enter the MFI business.

It is important for the bank to focus on agriculture as in the recent past it has been struggling to meet the priority sector target (40 per cent) set by the RBI. Following which it has been forced to invest in RBI stipulated instruments which have a lesser yield than normal advances. As on March 31, 2006, the priority sector advances constituted 32.73 per cent of its total advances as against the stipulated 40 per cent.

``The bank has been in a recast mode. We are now largely focusing of small and medium enterprises and rural markets. We have build an agriculture portfolio of around Rs 200 crore,'' said Pravin Batra, head of corporate and business banking group, DCB.

"The bank will now be priority sector compliant. We will meet the overall limit of 40 per cent, however, fall short on the direct agriculture target which is pegged at 13.50 per cent,'' added Batra. The bank through its 67 branches in particular in northern and western region and areas in southern part of the country have been active in warehouse receipt financing and micro finance activity. The bank has lend around Rs 25 crore to micro finance insitutions. SKS Microfinance recently securitised around Rs 10 crore of loans with DCB.