SBI in talks with top firms for microfinance alliance

State Bank of India (SBI) is planning to rope in corporates into micro-finance. The largest commercial bank in the country is planning to enter into talks with the Tatas, Reliance and ITC to jointly nurture the micro-finance network in India.

Through this model corporates can start self-help groups (SHG) in and around their factory units in far flung places. This way the company can also win over the labour force and win local acceptance. SBI will step in to finance the SHG.

In other words, the corporate will step into the shoes of non-government organisations which typically help form SHGs, explained banking sources.

Discussions have been on on an informal basis between SBI and the Tatas. Companies stand to gain tremendous amount of national as well as international recognition by venturing into the so far unexplored territory.

"Our bank officials have no time to form SHGs. But we can always train corporates on how to go about it," explained officials. SBI rural branches are very thinly staffed with just about two persons manning each branch.

Typically a grass root NGO or small community based organisation takes about 2-3 months to get a group of committed people together.

The group then gets access to loans like small business loans, consumption loans, agriculture loans and savings products like fixed and recurring deposits from banks.

About 90 per cent of these groups in India are made up of women and have shown a remarkable recovery rate of over 95 per cent.

SBI claims to be largest player in the micro-finance sector in India with about 20 per cent market share. It finances about 3 lakh SHGs and has cumulative disbursements of Rs 1,000 crore with Rs 750 crore outstanding.

The Tata Council for Community Initiatives (TCCI) which has been actively coordinating the social initiatives of the group such as setting up schools is likely to involved in the micro-finance endeavour.

ITC has been active in putting up internet kiosks for farmers and engaged in afforestation.

The total demand for credit is estimated to be a whopping Rs 45,000 crore and the supply so far has been almost negligible.