State Bank of India has decided to enter the microfinance market that has largely remained unaffected by the economic slowdown.
SBI, which is a state-owned lender, is setting up a new vertical called Financial Inclusion and Micro Market (FIMM). This vertical will handle the bank's microfinance operations. The bank has appointed KV Haridas as the deputy managing director of the FIMM vertical. The bank is at the moment laying the groundwork for the national roll-out of FIMM, according to The Economic Times.
The entry of the SBI, India's largest lender, is expected to stir up the microfinance sector. The bank is planning to offer microloans through its thousands of branches at lower than prevailing rates in the market right now.
"We have a big presence in retail and the corporate segment. Micro lending is one segment where we find great opportunities going forward," KV Haridas told the daily.
Aadhar would be the method of customer identification. An experiment run is underway at Patiala, Punjab.
The banks would provide loans for individuals without the need to form joint liability groups.
Bandhan Bank controls a quarter of the microfinance sector. Bandhan Bank gives loans at a rate of 17.95% while other private banks like HDFC lend at 20% or more.