Money & Banking

Engaging rural customers and creating livelihoods

K. R. Srivats Kovilpatti | Updated on July 25, 2013

SHG members have been trained in silk-worm rearing and drip irrigation, apart from non-farm activities.

HDFC Bank’s initiative in Thoothukudi district targets unbanked segments

Muthu Veerammal, a 50-year-old lady with agricultural interests, had never used banking services until recently.

A large part of her ‘financial exclusion’ could have been because of the absence of public sector banks in the vicinity of her village — Elanthapatti, a small hamlet about 20 km from Kovilpatti, a municipality in Thoothukudi district of Tamil Nadu.

Most of the 1,400 inhabitants (from 285 households) of this village have never seen a bank branch, nor has any public sector bank tried to reach their doorstep.

The extent of financial exclusion in India can be gauged from the fact that half the country is still unbanked.

About 51.4 per cent of nearly 89.3 million farm households do not have access to any credit, either from institutional or non-institutional sources and depend on money-lenders.

Underbanked areas

Thirty-four years after bank nationalisation, the number of rural branches of scheduled commercial banks is just 35,850. There are six lakh villages in India.

But Veerammal’s life has changed over the last year, thanks to HDFC Bank’s sustainable livelihood initiative (SLI). To further its financial inclusion objective, this private sector lender has not only provided finance to five self-help groups covering 70 households in that village, but has also imparted livelihood training in the farm sector.

Through SLI, the bank is reaching out to its rural customers in ways beyond business. It is trying to understand their needs and is helping them channel their incomes and expenditure effectively.

Veerammal, who is a member of one of the SHGs that had received micro-loans, has promptly repaid her dues. She is now looking to HDFC Bank to provide her with a short-term crop loan (as an individual).

For livelihood empowerment, HDFC Bank has trained SHG members in silk-worm rearing and drip irrigation. Villagers now hope to get a subsidy for implementing drip irrigation programmes, say bank officials.

The bank has also provided training in non-farm activities, such as tailoring to SHGs in the surrounding areas of Kovilpatti, which is mostly well-known for match factories, textile mills and the fireworks industry. Under its SLI, HDFC Bank not only provides loans to SHGs, but also empowers the underbanked and unbanked segments of the population.

The initiative has been growing fast in Tamil Nadu with net outstanding estimated at Rs 130 crore, of the Rs 630 crore at the national level.

There has been a good response to this initiative and the private sector bank may go slow on fresh exposure to Tamil Nadu under the SLI initiative, say officials.

So, what is in it for the private bank to push the envelope on SLI, besides earning a tidy return of 13-20 per cent on micro-loans?


The real answer is the hope that the bank will be able to cross-sell other products in these areas in the coming days. It has already done that in a small way by introducing micro-recurring deposit schemes to support the income-generating activities of this section of the population.

The recurring deposit scheme helps SLI clients save money to meet the non-income generating expenses of the family, such as school fees, festival celebrations and family events.


(The correspondent’s visit to Kovilpatti was arranged by HDFC Bank)

Published on July 25, 2013

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