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Welcome to my rural bank, the best in the country

Welcome to my rural bank, the best in the country

Author: Sonu Jain
Publication: The Indian Express
Date: May 5, 2002

Introduction: Move over Bangladesh, Gurgaon Gramin Bank's here, 80% recovery, dud loans a minimum

Talk to anyone about the ideal bank, that manages to adhere to strict commercial principles while fulfilling social objectives by lending to poor farmers, and they'll mention the Grameen Bank of Bangladesh - a bank that lent to farmers on the basis of guarantees of the community, whose moral pressure then ensured there are virtually no defaults.

Well, move over Bangladesh, we've got our own version of the Grameen Bank, which is not only as successful, its NPAs (dud loans are called non-performing assets) are even lower than those of the State Bank of India.

And that's when it's lending to tough farmers not always known to take kindly to people coming to collect debts - today, 90% of farmers who have borrowed funds make their payments on time.

First, the facts. Three years ago, on March 31, 1999, the Gurgaon Gramin Bank had NPA levels of 8.4 percent - today, they're down to under 2 percent, 1.99 percent to be precise. And profits, at Rs 30.4 crore, are higher than the Rs 13 crore of the Punjab & Sind Bank, for instance.

Gurgaon Gramin Bank, by the way, has the lowest NPAs among all Gramin Banks (most have NPAs over 5 percent). At Rs 828 crore, the bank (whose 119 branches service Gurgaon, Faridabad, Rewari and Mahendergarh) has a business of Rs 828 crore, which is the best among the country's 196 RRBs.

And over the last three years its deposits are up 44 percent and accumulated profits up 417 percent. How did Chairman S N Bhat accomplish a feat in three years that's got experts from Asian Development Bank and US Department of Treasury so excited they are studying his model in search of replicable formulae?

Two factors. First, and most important, the motivation, a fact that gets Syndicate Bank executive director A. Ramanathan (the Gramin bank operates under Syndicate Bank) to say: 'The bank has successfully rivalled public sector banks in terms of profitability, reduction in levels of NPAs and scouting of new clients." Bhat ensured that all his staff, right down to the peon, was trained at reputed institutes like BIRD Lucknow, National Institute of Rural Development Hyderabad and CAB Pune.

Strategic branches were identified, focussed attention given to 58 branches - today, all except one of these branches consistently report profit. NPA, Bhat told his staff, stood for New Profit Avenues, and staffers were felicitated at public functions for higher recovery rates over the last year, 250 have been given certificates of honour. Borrowing a leaf from the Bangladesh Grameen Bank's concept of exerting societal pressure on lenders, Bhat's colleagues and sometimes Bhat himself would spend time with village sarpanches, explaining how if the bank got into trouble (with loans not getting repaid), it would be the farmers who would be hit eventually. Not only did the NPAs come down by a whopping Rs 32 crore over 3 years, Rs 5.5 crore was also recovered from loans that had been written off in the past.

It has not lost track of its original mandate. At the Bashapur branch a steady stream of women can be seen coming in. Nirmala Devi who first opened an account in 1998 had a purdah so long that she could could barely see. Today, she is a leader of one of the 1400 self help groups set up by the bank for microcredit and earns upwards of Rs 1000 per month making bags. "Earlier I had to ask my husband for a packet of bindis, now I lend him money in time of need," says Nirmala Devi. Another factor that helped Bhat was that, five years ago, the government allowed RRBs to go in for more 'commercial' lending in order to help make profits - Gurgaon Gramin today has Rs 56 crore loans to the non-priority sector, and this fetches it good returns. 'When I came the bank was making losses, but I saw how the bank was uniquely placed and looked as an opportunity to capture the personal banking segment of the area by establishing tie-ups with almost all major corporates', says Bhat.

Terms like Corporate Relationship Management which only existed in the lexicon of foreign banks have been put to use here by the Chairman. The result is the bank is patronised by 120 corporate clients including Maruti Udyog Limited, Whirlpool, Goodyear and Hero Honda Motors. 'I am identified not by my passbook number but my name and I can get loan the same day. Also if I don't have time, my slips are sent home," says an employee from Maruti Udyog who has been running an account there for the last two years.
 


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