ICICI Bank to increase its presence in rural and semi-urban areas

ICICI Bank, country’s largest private sector lender will be increasing its presence in rural and semi-urban areas.

Managing director and CEO Chanda Kochhar said in the bank’s annual report, “As we focus on enhancing our capabilities to serve our corporate and retail customers across India’s towns and cities, it is also our endeavor to proactively reach out to rural India and to the vast numbers of our people who do not have access to formal financial services.”

Bank is using its branch network for the distribution of most of its loans, rather than direct sales agents. By the end of March 2010 bank’s direct agriculture advances accounted to Rs 17,329 crore. The gross non-performing assets of agriculture and allied services accounted to 5.62 per cent of advances of this sector.

Last year bank expanded its branch network by adding more than 500 branches and now it has around 2000 branches.

It is expected that bank’s proposed merger with Bank of Rajasthan (BoR) is going to boost its plans to increase focus on rural and semi-urban areas. BoR has a total of 463 branches out of which 46 per cent are located in rural and semi-urban areas.

Earlier in 2005-06, ICICI Bank had increased its focus on rural areas. Although, it suffered heavy losses on this front and due to this it had to stop its rural ventures for sometime. In 2006, the bank was cheated of Rs 200 crore at the central and state government warehouses in Kolhaput district in these warehouses it had not engaged third-party collateral managers. In 2006-07, ICICI Bank had kept a provision of Rs 93 crore to cover losses from frauds related to the warehouse receipt-based financing for agricultural products.

Due to this bank shrink its rural loan book by 50 per cent to Rs 10,000 crore at the end of September 2007. By the end of March 2007 its rural loan book amounted to Rs 20,000 crore.

To fulfill its rural market requirement bank commenced several initiatives which included offering credit through micro-finance institutions, micro-insurance and micro-investment products. It is giving financial support in the rural market, including farmers, traders, commission agents, small processors and other medium- and large agri-corporates. As of March 31, 2010 bank had around four million micro-finance borrowers with an outstanding portfolio of Rs. 3,179 crore.