Ex-Citibanker to float NBFC for urban poor

As someone said, once a banker always a banker. This is turning out to be true in the case of Ramesh Ramanathan, who quit his Citibank job in the US to start a social upliftment organisation, Janaagraha, in Bangalore.

Ramanathan over the last seven years has also been operating a micro-finance organisation Janalakshmi Social Services, offering micro-credit to urban poor.

According to regulations in India, a micro-finance organisation under section 25 of Companies Act cannot raise deposits from the public, but can only lend to a certain section of population. This, according to Ramanathan, is proving to be a hurdle to widen his reach and broaden the agenda of financial inclusion.

To overcome this hurdle, Ramanathan plans to create a holding company, which will serve the norms of operating a non-profit organisation, and this holding company will float an NBFC (non-banking financial company).

Dell Foundation, Lok Capital (in which CDC is an investor) and Bellwether Microfinance are together picking up minority stake in the NBFC.

"This will be a recognised NBFC which can raise deposits and carry out various other financial activities. The only difference is that we are focussed on urban poor and we will continue on that path," Ramanthan detailed.

This move to set up an NBFC is part of his vision to move beyond the narrow definition of micro-credit to a more broadbased one of micro-finance, encompassing a range of financial services to include credit, savings, insurance, remittance services etc. According to information available, the licence for starting this NBFC is expected anytime soon.

Janalakshmi has cumulatively lent close to Rs 30 crore to around 2 lakh people by raising resources from institutions such as Nabard and Sidbi.

"We lend at a rate of 24 per cent including our loan costs, operations costs and other variables. Our NPA is at around 3 per cent and we are adopting technology to reduce our operation cost so that we can lend at a much lesser rate of interest," Ramanathan said.

Janalakshmi's business objective is to become a financial services provider to the sub-prime sector, providing Rs 586 crore for at least 5 lakh customers in the next 5 years, said Ramanathan, elaborating on his plans, that they have entered into a pact with Financial Information Network and Operations Ltd (FINO) for deployment of a core banking solution on i-flex platform.

"This a pay per usage model, and FINO along with IBM has implemented this solution for us. This deployment will enable our customers to have a smart card through which, besides other features, can participate in fruit and vegetable auctions at Safal outlets without having to carry cash," he noted.