We have strong faith in microfinance business: Romesh Sobti

IndusInd Bank has strong faith in microfinance business, said Romesh Sobti, MD & CEO.

This observation comes in the backdrop of the private sector bank entering into a ‘confidentiality, exclusivity, and standstill’ agreement with Bharat Financial Inclusion last month for due diligence and discussions to evaluate a potential strategic combination between the two financial sector entities.

Sobti said, “The (microfinance) industry is back at normal levels of disbursement since demonetisation…The industry has taken more than affirmative steps to get over the hump…The micro-finance industry has performed much better than it was expected to.”

“We’d never get into a transaction of this nature when there is volatility… Demonetisation was a black-swan event and thus was only a blip and has thus not deterred us.’”

As at September-end 2017, microfinance accounted for 2.18 per cent of the overall loan book. Sobti said this is expected to grow to about 5 per cent by 2020.

Under microfinance, the bank provides loans to weaker sections of society through the ‘business correspondent model’ involving microfinance institutions that are geographically spread across the country. According to the bank’s annual report, the loans have helped support micro-enterprises such as saree trading, snack stores, tea stalls and bicycle repair shops.

The bank, according to the report, has a dedicated Inclusive Banking Group which adopts a collaborative approach by partnering with suitable intermediaries/ institutions for furthering the cause of financial inclusion.