Comments on: Gold Over PPF

By: Navin

Navin — Fri, 16 Dec 2005 21:44:52 +0000

Cow,

Nicely put. The default levels are high among rural sector borrowers.

Banks have to follow risk management standards. Suppose any European bank , say barclays comes and opens shops in rural india. All lending will be tagged with a high risk of default and their figures will look bad. BASSEL II ranking will tank for that bank. So forget foreign private banks coming to rural India.

Let the farmers carry on buying gold - whats wrong with it ? :-)

By: raven

raven — Fri, 16 Dec 2005 21:39:39 +0000

i want to sell gold: i goto the market, check the price around, sell, get my money, come back.

i want to withdraw from my PF/PPF account: i goto the babu’s office, grease some hands, get my money less a percentage. they deserve the money, afterall they’re paying me, so what if its my money!

By: cow tse tung

cow tse tung — Fri, 16 Dec 2005 15:02:24 +0000

Personally, I think major banks in India are avoiding the foray into rural and agribusiness banking because a majority of the farming is for self-sustenance. For a profit-oriented financial institution seeking to increase its lending base, or deposit growth, this is an economically unviable alternative, as there is a high chance that potential borrowers are almost certain defaulters, even as customer savings wouldn’t even meet break-even levels.

Then comes the issue of educating the farmer about the benefits of investing in a superannuation/provident fund. It might be an idea for the government/postal department/financial institutions to hire extension experts and impart some form of finance-related education, and maybe even serve as facilitators of change, w.r.t. the primary sector.

Maybe India could take a cue from Japan ( http://news.bbc.co.uk/2/hi/asia-pacific/4340756.stm ) and restructure its postal system, to create a banking giant?!

By: Amit Varma

Amit Varma — Fri, 16 Dec 2005 12:48:14 +0000

Nanda Kishore, I couldn’t agree with you more, and I wonder about the same things. Would any banker reading this, or anyone in the know, like to shed more light on this? Isn’t there a fortune at the bottom of the pyramid, as the phrase goes?

By: Nanda Kishore

Nanda Kishore — Fri, 16 Dec 2005 09:49:57 +0000

Amit, I wonder why is it that private sector banks and NBFCs not moving into the rural areas? Surely, there is a market there that needs to be tapped, given that the consumer is thoroughly frustrated with the services available. I’ve read stories about HLL was aggressively pursuing the rural market with innovative strategies, may be the banks can look at that example.

On a related note, I was thinking about the way Barclays Bank attempted to replace rural branches in the UK with counters set up at post offices (because of high overheads), and then thought why it couldn’t work in India. Of course, the postal department would not entertain any such thing here.