FUNDING METHODOLOGY ADOPTED BY HDFC BANK AND OTHER MFI's

Research Objectives –

1. To compare the lending policies of HDFC BANK with other banks and MFI’s 2. SWOT Analysis 3. To extend credit support to the potential areas

Research Methodology –

1. Preparation of questionnaire.2. Primary and secondary data collection.3. Method of sampling: Stratified random sampling4. Focused group discussions.5. Comparative study and SWOT analysis

INTRODUCTION HDFC BANK LTD IS DEALING WITH TWO PRODUCTS UNDER SELF LIVELIHOOD INITIATIVE:

SELF LIVELIHOOD INITIATIVE

SELF HELP GROUP

JOINT LIABILITY GROUP

SLI MEMBER PROFILE OF HDFC

10

70

155

AGE CATEGORY IN THE GROUP

YOUNG: 18 – 25

MIDDLE AGE: 26 – 45

AGED: 46 – 55

OLD > 55ILLETRATE

20%

LITERATE80%

PERCENTAGE OF EDUCATION IN THE GROUP

●LITERATE: READ AND WRITE

●ILLETRATE:CANNOT READ AND WRITE

9

24

55

23

1Annual Family Income of SLI members

<12000 12000-25000 25000-5000050000-1lac >1lac

27%

73%

%activity member

no yes

120 MEMBERS

Tiffen Stitching Farming Parlour Fruit/veg. shops/Vendors

Personal expenses

7(not active)

113(active members)

90%

10%

FUND AVAILING

BANKS/MFI'SLOCAL LENDERS

NO LOAN PSU UJJIVAN JANLAXMI BANDHAN BELSTER SURYODAY0

5

10

15

20

25

30

35

40

11

34

12

33

12

3

8

INDEBTHNESS OF CUSTOMER

INDEBTHNESS OF CUSTOMERS

PSU(34) UJJIVAN(8) JANLAXMI(21) SURYODAY(4) BELSTER(3) BANDHAN(9)

11(NO LOAN)

Borrowing and Expenditure

LESS PREFERRED MOST PREFERED210-1-2

Dime

nsion

2

1.0

0.5

0.0

-0.5

-1.0

HDFC

UJJIVAN

EQUITASSKS

ICICI

GRAMEENKOOTA

SPANDHANA

JANALAXMI

COMPARATIVE ANALYSIS

MDS

CRITERIA HDFCJANALAKSHMI UJJIVAN EQUITAS SKS SPANDANA GRAMEEN KOOTA ICICI BANK

INITIAL LOAN AMOUNT 1000030000-40000 Rs 30000 Rs 20000 Rs 15000 Rs 10000 Rs 15000 Rs 50000

From the above it can be inferred that (janalaxmi,hdfc bank,sks) are on the same expansion and growing rate,so bank should adopt certain policies which differentiate hdfc from janalaxmi and sks.

CRITERIA HDFC JANALAKSHMI UJJIVAN EQUITAS SKS SPANDANA GRAMEEN KOOTA ICICI BANK

PRODUCT SHG and JLG JLG JLG JLG JLG JLG JLG/SHG JLG and SHG

ROI 19% , 14.08% 23.75% 23.6% 22% 19.7% 27.6% 23% 18-20%

SOURCING Bank channel

Bank channel,lead from existing group members

old customer, Bank channel,pamphlets

old customer Bank channel,pamphlets

Bank channel Bank channel Bank channel

NGO, Bank channel

NO OF MEMBERS 5-20

5-25

5-20 8-20 5-20

No limit of max member(divide in sub groups of 5 to 10)

5- 30

10-20

LITERACY RATE>80% not considered

not considered not considered 20% of the group Not considered

Not considered

AGE OF THE GROUP

Minimum 12 months 6months

(12-24) months12months-24months Nil Min 6 months Minimum 6 months Min 6 months

COMPOSITION Should not belong to same caste,same family.

Know each other,not same family

Know each other,not same family

Know each other, , should not be of same family

Know each other, should not be of same family



As per criteria of ngo

DISTANCE FROM CENTRE OF MEETING OF THE GROUP

1 kms200-300m

less than 1 km 100-300m200m Less than 2 kms Less than 2 kms

Not considered

CRITERIA HDFC JANALAKSHMI UJJIVAN EQUITAS SKS SPANDANA GRAMEEN KOOTA ICICI BANK

INSURANCE COVERAGE Rs 100 for JLG yes (Rs 120) Nil

yesYes Nil yes Yes

REGULARITY OF MEETINGS 1 time in a

monthOn a fixed date

weekly4 meetings before loan disbursement

On a fixed date

On a fixed date

15 days one meeting with bank officials

Yes

TAT 5 days 3-5 days 7 days 14 days 5days 10 days 4-5 days 3days

R-DDone(SHG) Not considered

Not considered Not considered Not considered Not considered Not considered

Not considered

LENDING

not first lender fresh and existing

fresh and existingBoth fresh and existing groups

Both

Both

Both fresh and existing

Every member should avail loan

TOP UP AMOUNT Given

Not given

Not given5000 given on completion of 10 weeks.

Not Given

Not given

Not given

Not given

MARITAL CRITERIA

Married, unmarried

Mostly married if unmarried age>40

Married

Married Married

Married(compulsory present of husband during loan disbursement)

Married

Married

CRITERIA HDFC JANALAKSHMI UJJIVAN EQUITAS SKS SPANDANAGRAMEEN KOOTA ICICI BANK

COLLECTIONS

done in group in jlg 1st collection is on 15th day of funding

On 5th or 15th of every month (1st amount is maximum)

WeeklyOn 28th of every month

Fixed date

Fixed date in a week or month by bank officials

Weekly

No collection of amount as its deducted from their account

RATING 100/200 80/100 120/ 200 No rating No rating No rating No rating 700/ 1000DISTANCE FROM BANK TO GROUP 25 KMS

25KMS

25-50KMS 25KMS25KMS

25KMS

25KMS

NOT COSIDERED

DOCUMENTS FORVERIFICATION

Aadhar card,voter id,electricity bill(jlg)

Aadhar card,voter id,electricity bill


Ration card,voter id,aadhar card

Aadhar card,voter id



Ration card,voter id,aadhar card

DEDUPESAS/Highmark

SFDC,Highmark,EQUIFAX

Highmark HighmarkHighmark Highmark Highmark Highmark

By considering the above criteria the below data infer that bank don’t have any threat from certain mfi’s like UJJIVAN as the significance value is coming more that 0.05, and in rest mfi’s and bank we can see that their policies are in competition with HDFC BANK LTD, their significance value is less than 0.05.

The MFI customer base as a percentage of total households in most southern and eastern states is alarmingly high. Our analysis suggests that in the five large states of Tamil Nadu, Karnataka, West Bengal, Assam and Odisha, which account for 50% of India’s total outstanding microfinance credit, one of every five households has borrowed from MFIs as of FY15. In the top 7 states which account for two-third of total microfinance credit, one of every ten households has borrowed from MFIs.

With the above data we can see that MFI’s penetration is less in the northern states which holds a good opportunity for the bank to expand in those areas, also no of rural people inhabiting in states like Bihar, Uttar Pradesh, Madhya Pradesh are more comparison to the southern states so those untapped areas hold a good opportunity to expand with the bank credit policies.

• Increasing competition(MFI-BANKS)• Not utilization of credit for economic

activity• Money lenders and brokers decreases ROI

• Offer New Schemes/products• Open More Branches

• Distance from the Branch • Less Number of Staff• Rules and regulations not properly

followed

• Special Services.• Huge networking.• Low Interest Rate• Strong Customer Base• Strong Brand Image• Timeliness service

STRENGTH WEAKNESS

THREATOPPORTUNITY

SWOT ANALYSIS

SUGGESTIONS AND DISCUSSIONS• Bank should increase the initial funding amount. • Provide an emergency fund• Bank officials should visit the groups on weekly basis so that they could get the idea where the group is utilizing their

credits.• For knowing the repayment capacity of the individual bank should look at their annual source of income and the annual

return from that.• Bank should try to associate itself with the NGO’s for sourcing.• Monthly repayments can be deducted from the savings account itself.• Provision of tollfree number with their phone number linked with the Bank. If such system is implemented it will be

very useful for the members in clarifying their doubts, as in every group there may be few members who feel shy to ask their doubts in meeting.

• Bank can look forward for the formation of subgroups in case of JLG.• Bank should link with cooperatives like dairy, sugarcane factories and MNREGA organizations for sourcing. As these

cooperatives have registered stakeholders, whose spouse may be engaged in some or the other activity who can be trained for SHG/JLG funding like Mavin does for ICICI.

• Share data base of mfi’s and bank.

FUNDING METHODOLOGY ADOPTED BY HDFC BANK AND OTHER MFI's

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