The Hindu Business Line : Saraswat Bank bets big on micro fin, IT

Saraswat Co-operative Bank Ltd is looking to increase profits through its proposed wholly owned micro-finance subsidiary and the IT subsidiary set up jointly with Infrasoft Technologies.

The entry of big banks in the retail segment has put pressure on net interest margins and pushed up the cost of lending, said Mr S.K. Banerji, Managing Director, Saraswat Bank.

Through the micro finance subsidiary, the bank plans to focus on advances of up to Rs 25,000 to small farmers and small industries involved in agro-based activities. The bank is awaiting the Reserve Bank of India clearance for the licence.

The initial capital investment for the subsidiary would be Rs 10 crore, but the bank has got approval from its general body for investment up to Rs 50 crore.

Rural focus

Another reason for setting up the subsidiary is to reach out to rural and semi-urban areas, without opening branches.

The RBI has not allowed co-operative banks to open new branches for the past couple of years. This has made it difficult for them to expand their network.

In November 2005, the bank set up an IT subsidiary jointly with Infrasoft Technologies Ltd, called Saraswat Infotech Ltd (SIL), becoming the first co-operative bank in the country to do so.

SIL looks after all IT-related activities of the bank such as credit processing, valuation, online computerisation and implementation of core banking solutions and so on. From next month SIL will offer these and IT related advisory services to other co-operative banks as well. The bank has invested Rs 10 crore for the subsidiary and the staff strength is 25.

"We are meeting other co-operative banks and giving them a fair idea of what we can do. We can share our IT infrastructure on a transaction basis and also help them with CBS implementation," Mr Banerji said.

For the current fiscal, the bank has set a target of Rs 10,000 crore of deposits.

The bank plans to increase its deposit base to Rs 25,000 crore in five years and also increase its network to 250 branches.