MICROCAPITAL BRIEF: Microfinance Branches Opened by Indian Bank and Canara Bank in Tamil Nadu, India, Allow Self-Help Groups to Gain Access to Credit

According to a recent article by The Hindu newspaper, self-help groups (SHGs) in Tamil Nadu, India, have achieved greater access to credit due to openings of microfinance branches of private commercial banks, such as Indian Bank and Canara Bank, in rural areas. SHGs usually consist of groups of women, who pool together sums of money to save and take out loans from banks. According to the article, currently, Indian Bank has established 12 microfinance branches and Canara Bank has opened 2 branches in the state of Tamil Nadu. Until these branches were opened, SHGs had accounts in commercial banks in the cities, which provide “limited priority to the poor.” The microfinance branches are operated by staff members who are trained to understand and cater financial services especially towards the needs of SHGs. They also provide services such as management training, production chain establishment, and marketing strategies for businesses. Bank officials claim that these microfinance branches make financial services more readily available and specialized to SHGs’ needs.

Bibliography:

[1] The Hindu. “Microfinance branches ease credit flow to SHGs.” http://beta.thehindu.com/news/cities/Madurai/article75139.ece

Original Source Article: The Hindu

“Microfinance branches ease credit flow to SHGs”

January 4, 2010

The opening of microfinance branches has accelerated the flow of credit to self-help groups in the State.

These branches are manned by staff that are specifically trained to cater to the needs of SHGs and are aware of their requirements.

At present, such microfinance banks have been established in Tamil Nadu only by Indian Bank and Canara Bank, each having 12 and 2 branches respectively, according to a banking official who monitors flow of credit. Both banks have microfinance branches in Madurai.

A Reserve Bank of India officer told The Hindu that microfinance branches benefit both SHGs and the banks. While the SHGs get priority treatment at these branches, the workload of regular branches decrease as all SHG accounts in the city are transferred to the microfinance branches, the RBI official added.

Many SHG members told RBI Regional Director K.R. Anandha during a meeting organised at Chekkanoorani in Madurai district recently that more of their loan applications were getting sanctioned since the establishment of microfinance branches. Addressing the meeting, Mr. Anandha said that TamilNadu had one of the most active SHG movements in the country.

According to a Canara Bank official, their microfinance branch here was the first such branch established by the bank in Tamil Nadu with the next one opened at Coimbatore last week.

The official said that since when the branch was opened in April, it has formed 560 SHGs and provided credit linkage to 375 SHGs to the tune of Rs. 3.60 crore. Apart from uplifting women and physically handicapped, the branch also focuses on expediting credit flow. “We were on track to reach the targets set by the circle office in term of quantum loans and credit disbursal. There is also a good reception from SHGs,” the official said.

M. Kathiresan, Deputy General Manager and Circle Head, Indian Bank, said that its Micro Sate Branch, opened in March, had formed 929 SHGs and extended loan to the tune of Rs. 8.52 crore.

“This branch also provides expert inputs and training to SHGs by conducting meetings and bringing in resource persons. We also allow them to conduct meetings in this branch,” he said. The branch also provides free publicity to SHGs by allowing them to display their products. The branch had beensuccessful and has attracted a tremendous response from SHGs, he said.

“The branch has a high repayment rate of nearly 98.5 per cent. Indian bank has 27 microfinance branches in India,” he said.

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