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The National Bank for Agriculture and Rural Development (Nabard) will consider converting its subsidiary Nabard Financial Services into a “small finance bank” if the soon-to-be unveiled Reserve Bank of India guidelines for differentiated banks allow all-India operation for such banks.
The RBI is expected to issue final guidelines for differentiated banks — payment as well as small banks — by the end of this month.
Nabard owns 68 per cent stake in the Bengaluru-headquartered Nabard Financial Services (Nabfins). The balance stake is held by the Karnataka Government, Canara Bank, Union Bank of India, Bank of Baroda, Dhanalakshmi Bank and Federal Bank.
“We will be keenly watching developments on this (differentiated bank licensing) front…Once the guideline (on small finance banks) comes out, we will take a close look at it and consider it as an option.
“…This is an opportunity. We already have a well-functioning non-banking finance company, which gives small loans,” said Harsh Kumar Bhanwala, Chairman, Nabard.
He said Nabfin, which is a non-banking finance company (NBFC), was created with the sole objective of telling the MFI (microfinance institution) sector that it can also lend at reasonable rates of interest.
“Whereas average lending by other NBFC-MFIs is close to 24 per cent, Nabfin has been able to lend at 16-17 per cent and it is profitable. It has got close to 99 per cent recovery rates,” said the Nabard chief.
Nabfin currently operates in four States — Karnataka, Tamil Nadu, Andhra Pradesh, and Maharashtra. Plans are afoot to take it beyond these states.
Over the last four years that Nabfin has been functioning, it has reached over 38,000 self-help groups covering more than 5.7 lakh rural households. As on March-end 2014, it had a loan portfolio aggregating ₹1,320 crore. Nabard is also planning to launch a pilot programme for digitisation of all self-help group (SHG) records in 10 districts spread across 10 States of the country. Under the pilot there will be a couple of components — one component will be digitisation of SHG accounts (as of now they are all keeping manual accounts via registers), and details about when the group meets, and the minutes of the meeting.
Secondly, each SHG will be linked to the bank. So, SHG members can operate their account from the village.
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