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P R O J E C T W O R K F O R F I N A N C I A L
I N S T I T U T I O N S A N D P R A C T I C E
Rural Banking- Challenges
Submitted By,
Anuradha T
Kripa Shridhar
Priya Khatri
Durgaprasad Vavileti
Pragadhish C
Jacob Raphael
ACKNOWLEDGEMENTS
We wish to express our deep sense of gratitude to Mr. Ramesh
Subramanian, our professor and guide who drive and guide us to do
this project work.
P G D M W E 3 0 B A T C H
A P R I L 2 0 1 4
Guided By,
P R O F . R A M E S H
S U B R A M A N I A N
We pay our sincere courtesy to all the information
providers who gave valuable information collected for this project.
Our sincere thanks to the institution, Institute for Financial
Management and Research (IFMR) B School, who provided an
opportunity to learn from Mr. Ramesh.
We deeply acknowledge each one of us in our team, who have
made equal contribution and made this a complete project.
Last but not the least; we would thank all of our co-workers, family
members and friends for their support and encouragement.
CONTENTS
Acknowledgements.................................2
Introduction............................................4
Background............................................5
Indian Banking Sector Outlook - 2013...5
RBI may lower key policy rates, if inflationary pressures ease 5
Asset quality will need to be closely monitored 6
More impetus on fee based and non-interest income services 6
Financial inclusion to play a key role in the near future 7
Banks will expand In overseas market...8
Mobile banking, next major technological leap 8
Competition set to intensify...................8
Banking scenario in Rural India.............9
Financial Inclusion.................................9
Rural Banking Sector: Big Challenges & Road Ahead 11
(i) Priority sector lending.....................11
(ii) Regional Rural Banks.....................14
(iii) Financial Inclusion.........................15
Case Study............................................22
Repco Bank...........................................22
ORIGIN.................................................22
MAIN OBJECTIVE................................22
Direct Assistance..................................22
Employment Scheme............................23
SYSTEMS AND PROCEDURES............23
Subsidaries of REPCO..........................23
REPCO HOME FINANCE LIMITED.....23
REPCO MICRO FINANCE LIMITED....24
Conclusion............................................25
References............................................26
INTRODUCTION
This project titled “Rural Banking – Challenges” is one of the most
important challenges that any bank or a Gnancial institution,
including the Reserve Bank of India, faces in the current scenario
in India. The topic is indeed a huge area which requires much of
the time as an investment to be investigated for the Indian
scenario. However, with the minimal time available, we tried to
source relevant information through primary as well as secondary
source and have amended it into this project work. Some of us in
our team, being into the Gnancial as well as technology sector, we
are glad to bring our experience and knowledge into this project.
Operating a Gnancial institution in a rural village is never easy for
any bank. It involves so many challenges. We tried to identify some
of the common challenges that any bank or Gnancial institution
face to operate / open a branch in rural India. We have also
included a case study of a Gnancial institution. Finally, we have
included our opinions and suggestions in the conclusion part of the
project.
The key challenges identiGed are as follows
Literacy and Financial Literacy in rural areas
Viability of small ticket transactions
Distributions network and reach
Credit Risk on providing loans to low net worth
individuals and business
Technology challenges
KYC and other regulatory documentation requirements
We believe that this project would be useful for most of the
professionals in the Gnancial sector. Most of the private banks,
public sector banks, regulators, technology professionals,
entrepreneurs, micro Gnance institutions, non-banking Gnance
companies, section 25 companies, and other Gnance professionals
may make use of it.
BACKGROUND
INDIAN BANKING SECTOR OUTLOOK - 2013
Over the past couple of years, the Indian banking sector has
displayed a high level of resiliency in the face of high domestic
inflation, rupee depreciation and Gscal uncertainty in the US and
Europe. In order to stimulate the economy and support the growth
of banking sector, the Reserve Bank of India (RBI) adopted severe
policy measures such as increasing the key monetary policy rates
such as repo and reverse repo 16 times since April 2'009 to Oct
2011 and tightening provisioning requirements. Amidst this
economic scenario, the key challenge for the Indian banking system
continues in improving their operational eKciency and implement
prudent risk management practices. Some of the key trends
expected to emerge in the near future are as under-Economic
slowdown likely to impact the demand for credit.
High interest rates, subdued industrial production and domestic
consumption impacted the growth of the Indian economy which
slowed down from 8.4% in FY11 to 6.5% during FY12.The
scheduled commercial banks' (SCBs) overall credit grew at a
slower pace during FY12 at 17% y-o-y as compared to 21.5%
registered during FYll.As per the recent RBI data, the non-food
bank credit increased by 15.5% in Oct 2012 over its corresponding
month previous year, as compared to 18.2% witnessed in Oct 2011
over its corresponding month previous year. Similarly, credit to
industry and services sector recorded a slower growth of 15.2%
and 13.7% respectively as against 23.1% and 18.4% during the
same period. As per RBI's second quarter review of monetary
policy for FY13, the GDP growth estimates for FY13 is revised
downwards from 6.5% forecasted earlier to 5.8%.Any further
slowdown in the Indian economic growth is likely to impact the
demand for bank credit.
RBI MAY LOWER KEY POLICY RATES, IF INFLATIONARY
PRESSURES EASE
